Mc GrawHillIrwin Copyright 2009 by The Mc GrawHill

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 2, YOU SHOULD BE ABLE TO: LO 1 Describe the kinds of organizations that exist and the three levels of strategy in them. LO 2 Describe how core values, mission, organizational culture, business, and goals are important to organizations. LO 3 Explain how organizations set strategic directions by assessing where they are now and seek to be in the future. 2 -2

LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 2, YOU SHOULD BE ABLE TO: LO 4 LO 5 Describe the strategic marketing process and its three key phases: planning, implementation, and evaluation. Explain how the marketing mix elements are blended into a cohesive marketing program. 2 -3

AN “A” IN AN ICE CREAM MAKING COURSE! CAN THIS REALLY BECOME A BUSINESS? 2 -4

LO 1 TODAY’S ORGANIZATIONS KINDS OF ORGANIZATIONS Organization – legal entity Offerings (products, services, ideas) Business Firms – for profit Not-for-Profit Organizations Industry 2 -5

LO 1 TODAY’S ORGANIZATIONS KINDS OF ORGANIZATIONS Used Interchangeably Organization Firm Company Corporation 2 -6

LO 1 TODAY’S ORGANIZATIONS Can’t WHAT IS STRATEGY? Be “All Things to All People” Strategy – long-term course of action designed to deliver a unique customer experience and accomplish organization’s goals Marketing’s Role – help set direction and move organization there 2 -7

LO 1 TODAY’S ORGANIZATIONS STRUCTURE—CORPORATE Corporate Chief Level Marketing Officer (CMO) Cammie Dunaway Yahoo! Eduardo Conrado Motorola Networks Leslie Short FUBU 2 -8

LO 1 TODAY’S ORGANIZATIONS STRUCTURE—SBU Strategic Business Unit (SBU) 2 -9

TODAY’S ORGANIZATIONS LO 1 ● STRUCTURE—SBU SBUs are key business units within diversified firms. Each SBU: ● ● has its own managers, resources, objectives, and competitors. pursues its own distinct mission. develops its own plans independently. focuses the attention of company managers so that they can respond effectively to changing consumer demand.

LO 1 TODAY’S ORGANIZATIONS STRUCTURE—SBU Strategic Business Unit (SBU) Level GE Commercial Finance GE Industrial GE Money (business loans, leases) (appliances, lighting, factory automation) (consumer home loans, credit cards) GE Healthcare GE Infrastructure GE NBC Universal (imaging, diagnostics, lifesupport systems) (aircraft engines, energy, transportation) (television, music, film) 2 -11

LO 1 TODAY’S ORGANIZATIONS STRUCTURE—FUNCTIONAL Functional Level Department Cross-Functional Teams 2 -12

FIGURE 2 -1 The board of directors oversees the three levels of strategy in organizations: corporate, business unit, and functional 2 -13

FIGURE 2 -2 Visionary organizations: (1) establish a foundation, (2) set a direction, and (3) create strategies 2 -14

LO 2 STRATEGY IN VISIONARY ORGANIZATIONS FOUNDATION (WHY) Core Values Stakeholders Mission or Vision Organizational Culture 2 -15

Star Trek Enterprise Why is a mission statement important? 2 -16

Medtronic’s “Rising Figure” Mural What does it signify to stakeholders? 2 -17

LO 2 STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) Business • What do we do? • What business are we really in? 2 -18

STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) Marketing Myopia (Marketing Nearsightedness) Management’s failure to recognize the scope of its business q Future growth is endangered when management is product oriented rather than customer oriented q Characteristic of organizations that are too narrowly defined

STRATEGY IN VISIONARY ORGANIZATIONS DIRECTION (WHAT) Avoiding Marketing Myopia by Focusing on Benefits Company Myopic Description Marketing-Oriented Description AT&T “We are a telephone company. ” “We are a communications company. ” Southwest Airlines “We are in the airline business. ” “We are in the transportation business. ” Merrill Lynch “We are in the stock brokerage business. ” “We are in the financial services business. ” Sony “We are in the video game business. ” “We are in the entertainment business. ”

STRATEGY IN VISIONARY ORGANIZATIONS LO 2 DIRECTION (WHAT) Goals or Objectives: S. M. A. R. T • Specific • Measurable • Attainable • Relevant • Time-based 2 -21

STRATEGY IN VISIONARY ORGANIZATIONS LO 2 DIRECTION (WHAT) Goals or Objectives: Types • Profit • Customer Satisfaction • Sales ($ or #) • Employee Welfare • Market Share • Social Responsibility • Quality • Efficiency 2 -22

LO 3 SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? 2 -23

LO 3 SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? Competencies Customers Competitors 2 -24

LO 3 SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? Competencies • Competitive Advantage • Fast Cycle Time • Quality • Benchmarking 2 -25

LO 3 SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? Customers What is the Strategic Focus of Lands’ End? 2 -26

LO 3 SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? Competitors Who are the Competitors of Lands’ End? 2 -27

SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? ● Business ● Boston Portfolio Analysis Consulting Group ● Market Share/Market Growth Matrix ● A four-quadrant chart that plots market share—the percentage of a market that a firm controls—against market growth potential.

LO 3 SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? Business Portfolio Analysis (BCG) Market Growth Rate High Stars Question Marks Cash Cows Dogs Low High Low Relative Market Share 2 -29

Market Share/Market Growth Matrix A four-quadrant chart that plots market share—the percentage of a market that a firm controls—against market growth potential. Relative Market Share High Low Market Growth Rate High Low Stars Question Marks Generate considerable income Have potential to become stars or cash cows Strategy: Invest more funds for future growth Strategy: Either invest more funds for growth or consider disinvesting Cash Cows Dogs Generate strong cash flow Generate little profits Strategy: Milk profits to finance growth of stars and question marks Strategy: Consider withdrawing

Kodak Consumer-Related Products What SBU type in the BCG growth-share matrix? Kodak digital camera Kodak digital photo printer Kodak film Kodak self-service kiosk 2 -31

FIGURE 2 -3 BCG business portfolio analysis for Kodak’s consumer SBUs for 2003 (solid circle) and 2010 (hollow circle) ② Kodak digital camera ① Kodak film sales: US, Canada, & W. Europe ③ Kodak digital photo printer ④ Kodak selfservice kiosk 2 -32

Market Attractiveness/ Business Strength Matrix ● Rates SBUs according to the attractiveness of their markets and their organizational strengths. ● Marketing attractiveness criteria include: ● Market share ● Growth ● Size ● Stability ● Potential profitability ● Extent of government regulations ● Potential environmental and social impact ● Competitive conditions

Spreadsheet Analysis 1. Helps planners anticipate marketing performance given specified sets of circumstances 2. Lays out a rigid columns and rows that organize numerical information in a standardized, easily understandable format.

LO 3 SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? Hedgehog Analysis • What Can We Be the Best At in the World? • What Drives Our Economic Engine? • What Are We Deeply Passionate About? 2 -35

LO 3 SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? Blue Ocean Analysis

LO 3 SETTING STRATEGIC DIRECTIONS TRACKING WITH MARKETING DASHBOARDS Car Dashboards and Marketing Dashboards Marketing Metrics and Graphics in Designing Marketing Dashboards Marketing Plan 2 -37

FIGURE 2 -4 An effective marketing dashboard like Oracle’s helps managers assess a business situation at a glance 2 -38

FIGURE 2 -5 (Condensed) The strategic marketing process has three phases: planning, implementation, and evaluation 2 -40

LO 4 THE STRATEGIC MARKETING PROCESS Strategic Marketing Process • How Do We Allocate Our Resources to Get Where We Want to Go? • How Do We Convert Our Plans to Actions? • How Do Our Results Compare With Our Plans, and Do Deviations Require New Plans? 2 -41

LO 4 THE STRATEGIC MARKETING PROCESS • Situation Analysis • Where the firm or product has been recently • Where is it now • Where is it headed relative to plans external factors and trends 2 -42

LO 4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • SWOT Analysis §Strengths §Weaknesses §Opportunities §Threats 2 -43

LO 4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • SWOT Analysis Study § Identify Industry Trends § Analyze Competitors § Assess the Organization § Research Present and Prospective Customers 2 -44

FIGURE 2 -6 Ben & Jerry’s SWOT analysis that serves as the basis for management actions regarding growth 2 -45

LO 4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 1: Situation (SWOT) Analysis • SWOT Analysis Study § Build on a Strength § Correct a Weakness § Exploit an Opportunity § Avoid a Disaster. Laden Threat 2 -46

LO 4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 2: Market-Product Focus and Goal Setting • Market Segmentation • Points of Difference 2 -47

LO 4 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Example: Medtronic’s Pacemaker • Set Marketing & Product Goals • Select Target Markets • Find Points of Difference • Position the Product 2 -48

LO 5 THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE Step 3: Marketing Program • Product Strategy • Price Strategy • Promotion Strategy • Place (Distribution) Strategy 2 -49

FIGURE 2 -7 The elements of the marketing mix must be blended to produce a cohesive marketing program 2 -50

LO 5 THE STRATEGIC MARKETING PROCESS THE IMPLEMENTATION PHASE Obtaining Resources Designing the Marketing Organization Developing Executing Schedules the Marketing Program • Marketing Strategy • Marketing Tactics 2 -51

FIGURE 2 -8 Organization of a typical manufacturing firm, showing a breakdown of the marketing department 2 -52

LO 5 THE STRATEGIC MARKETING PROCESS THE EVALUATION PHASE Comparing Results with Plans to Identify Deviations Acting on Deviations • Exploiting a Positive Deviation • Correcting a Negative Deviation 2 -53

FIGURE 2 -B Elements in typical marketing and business plans targeted at different audiences 2 -54

Profit is the reward to a business firm for the risk it undertakes in offering a product for sale. It is also the money left over after a firm’s total expenses are subtracted from its total sales. 2 -55

Strategy is an organization’s long-term course of action designed to deliver a unique customer experience while achieving its goals. 2 -56

Corporate Level The corporate level is the level in an organization where top management directs overall strategy for the entire organization. 2 -57

Strategic Business Unit (SBU) A strategic business unit (SBU) is a subsidiary, division, or unit of an organization that markets a set of related offerings to a clearlydefined group of customers. 2 -58

Strategic Business Unit (SBU) Level The strategic business unit (SBU) level is the levelin an organization where managers set a more specific strategic direction for their businesses to exploit value creating opportunities. 2 -59

Functional Level The functional level is the level in an organization where groups of specialists actually create value for the organization. 2 -60

Cross-Functional Teams Cross-functional teams consist of a small number of people from different departments in an organization who are mutually accountable to accomplish a task or common set of performance goals. 2 -61

Core Values Core values are the fundamental, passionate, and enduring principles of an organization that guide its conduct over time. 2 -62

Mission A mission is a statement of the organization’s function in society, often identifying its customers, markets, products, and technologies. The term is often used interchangeably with vision. 2 -63

Organizational Culture An organizational culture consists of a set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization. 2 -64

Business A business is the clear, broad, underlying industry category or market sector of an organization’s offering. 2 -65

Goals or Objectives Goals or objectives are the statements of an accomplishment of a task to be achieved, often by a specific time. 2 -66

Market Share Market share is the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself. 2 -67

Competencies consist of an organization’s special capabilities, including skills, technologies, and resources, which distinguish it from other organizations and provide value to its customers. 2 -68

Competitive Advantage A competitive advantage is an unique strength relative to competitors, often based on quality, time, cost, or innovation. 2 -69

Marketing Dashboard A marketing dashboard is the visual display on a single computer screen of the essential information related to achieving a marketing objective. 2 -70

Marketing Metric A marketing metric is a measure of the quantitative value or trend of a marketing activity or result. 2 -71

Marketing Plan A marketing plan is a road map for the marketing activities of an organization for a specified future period of time, such as one year or five years. 2 -72

Strategic Marketing Process The strategic marketing process is the approach whereby an organization allocates its marketing mix resources to reach its target markets. 2 -73

Situation Analysis A situation analysis involves taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization’s plans and the external factors and trends affecting it. 2 -74

SWOT Analysis A SWOT analysis is an acronym describing an organization’s appraisal of its internal Strengths and Weaknesses and its external Opportunities and Threats. 2 -75

Market Segmentation Market segmentation involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. 2 -76

Points of Difference Points of difference are those characteristics of a product that make it superior to competitive substitutes. 2 -77

Marketing Strategy Marketing strategy is the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. 2 -78

Marketing Tactics Marketing tactics are the detailed day-to-day operational decisions essential to the overall success of marketing strategies. 2 -79