Strategic Planning for Competitive Advantage chapter 2 Chapter

Strategic Planning for Competitive Advantage chapter 2 Chapter 2 Version 6 e Prepared by Deborah Baker Texas Christian University © 2002 South-Western 1

Learning Objectives 1. Understand the importance of strategic marketing and know a basic outline for a marketing plan. chapter 2 2. Develop an appropriate business mission statement. 3. Describe the criteria for stating good marketing objectives. Chapter 2 Version 6 e © 2002 South-Western 2

Learning Objectives (continued) 4. Explain the components of a situation analysis. 5. Identify sources of competitive advantage. chapter 2 6. Identify strategic alternatives and describe tools used to help select alternatives. 7. Discuss target market strategies. Chapter 2 Version 6 e © 2002 South-Western 3

Learning Objectives (continued) 8. Describe elements of the marketing mix. 9. Explain why implementation, evaluation, and control of the marketing plan are necessary. chapter 2 10. Identify several techniques that help make strategic planning possible. Chapter 2 Version 6 e © 2002 South-Western 4

Learning Objective 1 Understand the importance of strategic marketing and know a basic outline for a marketing plan. Chapter 2 Version 6 e © 2002 South-Western 5

Strategic Planning 1 The managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities. Chapter 2 Version 6 e © 2002 South-Western 6

Strategic Planning EVOLVING MARKET OPPORUNITIES 1 LONG RUN PROFITABILITY AND GROWTH RESOURCES & OBJECTIVES Chapter 2 Version 6 e © 2002 South-Western 7

Strategic Marketing Planning u What is the organization’s main activity? u How will it reach its goals? 1 The Marketing Plan Chapter 2 Version 6 e © 2002 South-Western 8

1 Planning The process of anticipating future events and determining strategies to achieve organizational objectives in the future. Chapter 2 Version 6 e © 2002 South-Western 9

The Marketing Plan 1 A written document that acts as a guidebook of marketing activities for the marketing manager. Chapter 2 Version 6 e © 2002 South-Western 10

1 Why Write a Marketing Plan? u Provides a basis for comparison of actual and expected performance u Provides clearly stated activities to work toward common goals u Serves as a reference for the success of future activities Chapter 2 Version 6 e © 2002 South-Western g in t ke n r Ma Pla 11

Marketing Plan Elements Business Mission 1 Statement Objectives Situation or SWOT Analysis Marketing Strategy Target Market Strategy Marketing Mix Chapter 2 Version 6 e Product Distribution Promotion Price Implementation © 2002 South-Western Evaluation Control 12

Learning Objective 2 Develop an appropriate business mission statement. Chapter 2 Version 6 e © 2002 South-Western 13

Defining the Business Mission u Answers the question: u. What business are we in and where are we going? u Focuses on the market(s) rather than the good or service u Strategic Business Units may also have a mission statement Chapter 2 Version 6 e © 2002 South-Western 2 14

2 Pepsi. Co’s Mission Statement “Pepsi. Co’s overall mission is to increase the value of our shareholders’ investment. We do this through sales growth, cost controls and wise investment of resources. We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of integrity. ” http: \www. pepsico. com Chapter 2 Version 6 e © 2002 South-Western 15

Strategic Business Units (SBUs) 2 Characteristics 1. A distinct mission and specific target market 2. Control over their resources 3. Their own competitors 4. Plans independent of other SBUs Chapter 2 Version 6 e © 2002 South-Western 16

3 Learning Objective Describe the criteria for stating good marketing objectives. Chapter 2 Version 6 e © 2002 South-Western 17

3 Marketing Objective A statement of what is to be accomplished through marketing activities. Chapter 2 Version 6 e © 2002 South-Western 18

3 Marketing Objectives Must Be: u Realistic u Measurable u Time specific u Consistent with Organization’s Priorities Chapter 2 Version 6 e “Our objective is to increase market share by 40% and to obtain customer satisfaction ratings of at least 90% in 2001. ” © 2002 South-Western 19

3 Marketing Plan Objectives u Communicate marketing management philosophies u Provide direction u Serve as motivators u Clarify thinking u Provide basis for control Chapter 2 Version 6 e © 2002 South-Western 20

4 Learning Objective Explain the components of a situation analysis. Chapter 2 Version 6 e © 2002 South-Western 21

4 SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) Chapter 2 Version 6 e © 2002 South-Western 22

4 SWOT Analysis S W O T Things the company does well. Internal External Chapter 2 Version 6 e Things the company does not do well. Conditions in the external environment that favor strengths. Conditions in the external environment that do not relate to existing strengths or favor areas. College of current weakness. ©South-Western Publishing © 2002 South-Western 23

4 SWOT Analysis Strengths and Weaknesses INTERNAL u u u Production Costs Marketing Skills Employee Capabilities Financial Resources Available Technology Company/Brand Image Chapter 2 Version 6 e © 2002 South-Western 24

4 SWOT Analysis Opportunities and Threats EXTERNAL u. Social u. Technological u. Demographic u. Political/Legal u. Economic u. Competitive Chapter 2 Version 6 e © 2002 South-Western 25

4 Environmental Scanning Collection and interpretation of information about forces, events and relationships in the external environment that may affect the future of the organization or the marketing plan implementation. Chapter 2 Version 6 e © 2002 South-Western 26

4 Environmental Scanning u Examination of macroenvironmental forces u Social u Demographic u Economic u Technological u Political / Legal u Competitive u Helps identify market opportunities u Provides guidelines for design of marketing strategy Chapter 2 Version 6 e © 2002 South-Western 27

5 Learning Objective Identify sources of competitive advantage Chapter 2 Version 6 e © 2002 South-Western 28

5 Competitive Advantage 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. Chapter 2 Version 6 e © 2002 South-Western 29

5 Competitive Advantage Cost Types of Competitive Advantage Product/Service Differentiation Niche Strategies Chapter 2 Version 6 e © 2002 South-Western 30

5 Cost Leadership u u u Obtain inexpensive raw materials Create efficient operations Design products for manufacture Control overhead costs Avoid marginal customers Chapter 2 Version 6 e © 2002 South-Western 31

5 Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins. Chapter 2 Version 6 e © 2002 South-Western 32

5 Sources of Cost Reduction Experience Curves Product Design Efficient Labor Reengineering No-frills Production Innovations Government Subsidies New Delivery Methods Chapter 2 Version 6 e © 2002 South-Western 33

Differentiation Competitive Advantage 5 Advantage achieved when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price than the competition. Chapter 2 Version 6 e © 2002 South-Western 34

5 Common Differential Advantages u Brand names u Strong dealer network u Product reliability u Image u Service Chapter 2 Version 6 e © 2002 South-Western 35

Sources of Differential Competitive 5 Advantage Value impressions Augmented products u Features of a product that signal value u Features of a product that are not expected by the customer Chapter 2 Version 6 e © 2002 South-Western 36

Niche Competitive Advantage 5 Advantage achieved when a firm seeks to target and effectively serve a small segment of the market. Chapter 2 Version 6 e © 2002 South-Western 37

5 Niche Competitive Advantage u Used by small companies with limited resources u May be used in a limited geographic market u Product line may be focused on a specific product line Chapter 2 Version 6 e © 2002 South-Western 38

Sustainable Competitive Advantage 5 A differential advantage that cannot be copied by the competition. Chapter 2 Version 6 e © 2002 South-Western 39

Sources of Sustainable Competitive Advantage 5 Patents Copyrights Locations Equipment Technology Organization’s Skills and Assets Customer Service Promotion Chapter 2 Version 6 e © 2002 South-Western 40

5 Strategic Windows The limited period during which the “fit” between the key requirements of a market and the particular competencies of a firm are at an optimum. Chapter 2 Version 6 e © 2002 South-Western 41

Learning Objective 6 Identify strategic alternatives and describe tools used to help select alternatives. Chapter 2 Version 6 e © 2002 South-Western 42

Strategic Windows Market Penetration Increase market share among existing customers Market Development Attract new customers to existing products Product Development Create new products for present markets Diversification Introduce new products into new markets Chapter 2 Version 6 e 6 © 2002 South-Western 43

Strategic Alternatives 6 Market Penetration Increase market share among existing customers. Market Development Attract new customers to existing products Product Development Create new products for present markets Diversification Introduce new products into new markets. Chapter 2 Version 6 e © 2002 South-Western 44

Strategic Opportunity Matrix 6 Present Product New Product Present Market Penetration Product Development New Market Development Diversification Chapter 2 Version 6 e © 2002 South-Western 45

Selecting a Strategic Alternative 6 Philosophy Common Tools Profitability Portfolio Matrix $ Chapter 2 Version 6 e Market Share © 2002 South-Western 46

Portfolio Matrix 6 Tools for allocating resources among products or strategic business units on the basis of relative market share and market growth rate. Chapter 2 Version 6 e © 2002 South-Western 47

6 BCG Portfolio Matrix HIGH LOW MARKET GROWTH RATE MARKET SHARE DOMINANCE Chapter 2 Version 6 e LOW ? $ © 2002 South-Western 48

6 BCG Portfolio Matrix HIGH LOW MARKET GROWTH RATE MARKET SHARE DOMINANCE High growth Market leaders Require cash $ Chapter 2 Version 6 e Low growth High market share High cash flow © 2002 South-Western LOW High growth Low market share Need cash Poor profit margins Low growth Low market share Minimal cash flow 49

Portfolio Matrix Example 6 MARKET SHARE DOMINANCE HIGH LOW MARKET GROWTH RATE HIGH Chapter 2 Version 6 e LOW Palmtop (PROBLEM CHILD) Notebook Computer (STAR) Personal Computer (CASH COW) Mainframe Computer (DOG) © 2002 South-Western 50

Strategies for Resource Allocation 6 Build Provide financial resources if SBU (Problem Child) has potential to be a Star. Hold Preserve market share if SBU is a successful Cash Cow. Use cash flow for other SBUs. Harvest Divest Chapter 2 Version 6 e Increase short-term cash return. Appropriate for all SBUs except Stars. Get rid of SBUs with low shares in low-growth markets. © 2002 South-Western 51

Market Attractiveness Matrix 6 Tool for allocating resources among strategic business units on the basis of market attractiveness and firm’s positioning. Chapter 2 Version 6 e © 2002 South-Western 52

Market Attractiveness Matrix (GE) 6 BUSINESS POSITON HIGH MEDIUM WEAK High Attractiveness Medium Attractiveness Low Attractiveness LOW MARKET ATTRACTIVENESS STRONG Chapter 2 Version 6 e © 2002 South-Western 53

Market Attractiveness 6 Attributes of an Attractive Market u u u High profitability Rapid growth Lack of government regulation Insensitivity to price increase Lack of competition Availability of technology Chapter 2 Version 6 e © 2002 South-Western 54

7 Learning Objective Discuss target market strategies. Chapter 2 Version 6 e © 2002 South-Western 55

7 Marketing Strategy The activities of selecting and describing one or more target markets and developing and maintaining a market mix that will produce mutually satisfying exchanges with target markets. Chapter 2 Version 6 e © 2002 South-Western 56

7 Target Market Strategy u Segment the market based on groups with similar characteristics u Analyze the market based on attractiveness of market segments u Select one or more target markets Chapter 2 Version 6 e © 2002 South-Western 57

7 Target Market Strategy u Develop a marketing mix that will produce satisfying exchanges with target markets Chapter 2 Version 6 e © 2002 South-Western 58

8 Learning Objective Describe elements of the marketing mix. Chapter 2 Version 6 e © 2002 South-Western 59

8 The Marketing Mix A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market. Chapter 2 Version 6 e © 2002 South-Western 60

8 Marketing Mix: The “Four Ps” Price Promotion Place Product Chapter 2 Version 6 e © 2002 South-Western 61

8 Product Strategies u The starting point of the “ 4 Ps” Product u Includes physical unit, package, warranty, service, brand, image, and value Chapter 2 Version 6 e © 2002 South-Western 62

8 Distribution (Place) Strategies Place u Product availability where and when customers want them. u Involves all activities from raw materials to finished products Chapter 2 Version 6 e © 2002 South-Western 63

8 Promotion Strategies Promotion u Role is to bring about exchanges with target markets u Includes integration of personal selling, advertising, sales promotion, and public relations Chapter 2 Version 6 e © 2002 South-Western 64

8 Pricing Strategies Price u The most flexible of the “ 4 Ps” u Price X Units Sold = Total Revenue Chapter 2 Version 6 e © 2002 South-Western 65

9 Learning Objective Explain why implementation, evaluation, and control of the marketing plan are necessary. Chapter 2 Version 6 e © 2002 South-Western 66

9 Following Up the Marketing Plan u Implementation u Evaluation u Control u Marketing Audit u. Comprehensive u. Systematic u. Independent u. Periodic Chapter 2 Version 6 e © 2002 South-Western 67

9 The Marketing Audit A thorough, systematic, periodic evaluation of the goals, strategies, structure, and performance of the marketing organization. © 2002 South-Western 68

Learning Objective 10 Identify several techniques that help make strategic planning effective. Chapter 2 Version 6 e © 2002 South-Western 69

Effective Strategic Planning 10 Ongoing Process Requirements Creativity Management Support Chapter 2 Version 6 e © 2002 South-Western 70