Strategic Planning for Competitive Advantage Chapter 2 Lamb

1 2 Understand the importance of strategic planning Define strategic business units (SBUs) 3 Identify strategic alternatives 4 Understand the marketing planning process 5 Develop an appropriate business mission statement (C) 2014 Cengage Learning Inc. All Rights Reserved. 2

6 Describe the components of a situation analysis 7 Identify sources of competitive advantage 8 Explain the criteria for stating good marketing objectives 9 Discuss target market strategies (C) 2014 Cengage Learning Inc. All Rights Reserved. 3

10 Describe the elements of the marketing mix 11 Explain why implementation, evaluation, and control of the marketing plan are necessary 12 Identify several techniques that help make strategic planning effective (C) 2014 Cengage Learning Inc. All Rights Reserved. 4

The Nature of Strategic Planning Understand the importance of strategic marketing and know a

Strategic Marketing Management What is the organization’s main activity? How will it reach its goals? The answer is by examining: • SBUs • Marketing Plan • Strategic Alternatives 1 (C) 2014 Cengage Learning Inc. All Rights Reserved. 6

Strategic Planning is… the managerial process of creating and maintaining a fit between the organization’s objectives and resources and the evolving market opportunities. The GOAL of strategic planning is long -term profitability and growth. 1 (C) 2014 Cengage Learning Inc. All Rights Reserved. 7

Strategic Business Units Define Strategic Business Units (SBUs) 2 8 (C) 2014 Cengage Learning

Characteristics of Strategic Business Units (SBUs) An SBU HAS… u A distinct mission and specific target market u Control over its resources u Its own competitors u Plans independent of other SBUs 2 (C) 2014 Cengage Learning Inc. All Rights Reserved. 9

Strategic Alternatives Identify strategic alternatives 3 10 (C) 2014 Cengage Learning Inc. All Rights

Ansoff’s Opportunity Matrix 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 (C) 2014 Cengage Learning Inc. All Rights Reserved. 11

Exhibit 2. 1 Ansoff’s Strategic Opportunity Matrix Present Product Present Market Penetration New Market Development Starbucks sells more coffee to customers who register their reloadable Starbucks cards. Starbucks opens stores in Brazil and Chile New Product Development Starbucks develops powdered instant coffee Via. Diversification Starbucks launches Hear Music and buys Ethos Water. 3 (C) 2014 Cengage Learning Inc. All Rights Reserved. 12

Boston Consulting Group Portfolio Matrix Star Cash Cow Portfolio Matrix Question Mark Dog 3

Exhibit 2. 2 Portfolio Matrix for a Large Computer Manufacturer 3 (C) 2014 Cengage

Portfolio Matrix Strategies Build Hold Harvest Divest 3 (C) 2014 Cengage Learning Inc. All

Exhibit 2. 3 3 High Cautiously Invest/Grow Medium Harvest/Divest Cautiously Invest/Grow Low Market attractiveness General Electric Model Harvest/Divest Cautiously Invest Low Medium High Business Position (C) 2014 Cengage Learning Inc. All Rights Reserved. 16

The Marketing Planning Process Understand the marketing planning process 4 17 (C) 2014 Cengage

What Is a Marketing Plan? u Planning – the process of anticipating future events and determining strategies to achieve organizational objectives in the future. u Marketing Planning – designing activities relating to marketing objectives and the changing marketing environment. u Marketing Plan – a written document that acts as a guidebook of marketing activities for the marketing manager. 4 (C) 2014 Cengage Learning Inc. All Rights Reserved. 18

Why Write a Marketing Plan? 4 u Provides a basis for comparison of actual and expected performance u Provides clearly stated activities to work toward common goals u Provides an examination of the marketing environment u Serves as a reference for the success of future activities u Allows entry into the marketplace with awareness (C) 2014 Cengage Learning Inc. All Rights Reserved. 19

Exhibit 2. 4 Elements of a Marketing Plan Business Mission Statement 4 Situation or SWOT Analysis Objectives Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control

Marketing Plan Elements Selecting which alternative to pursue depends on: 1. Philosophy and culture 2. Decision making tools The most common decision making tool is the matrix form. 4 (C) 2014 Cengage Learning Inc. All Rights Reserved. 21

Writing the Marketing Plan A complete marketing plan can allow an organization to achieve marketing objectives… HOWEVER the marketing plan is only as good as the information, effort, creativity and thought put into it. 4 (C) 2014 Cengage Learning Inc. All Rights Reserved. 22

Defining the Business Mission Develop an appropriate business mission statement 23 (C) 2014 Cengage

Defining the Business Mission u Answers the question, “What business are we in? ” u Focuses on the market(s) rather than the good or service u SBUs may also have a mission statement 5 (C) 2014 Cengage Learning Inc. All Rights Reserved. 24

Conducting a Situation Analysis Describe the components of a situation analysis 25 (C) 2014

SWOT Analysis Internal External 6 S W O T Strengths - things the company does well. Weaknesses - things the company does not do well. Opportunities - conditions in the external environment that favor strengths. Threats - conditions in the external environment that do not relate to existing strengths or favor areas of ©South-Western College Publishing current weakness. (C) 2014 Cengage Learning Inc. All Rights Reserved. 26

Components of a SWOT Analysis Examining internal strengths and weaknesses. Focus on organizational resources: • Production costs • Marketing skills • Financial resources • Company or brand image • Employee capabilities 6 • Technology (C) 2014 Cengage Learning Inc. All Rights Reserved. 27

Environmental Scanning Helps identify opportunities and threats. Designing a marketing strategy is based on six major environmental forces: • Social • Demographic • Economic • Technological • Political/Legal • Competitive 6 (C) 2014 Cengage Learning Inc. All Rights Reserved. 28

Opportunities in Education • Grockit and Dream. Box develop integrated web-based educational tools. • Technology-based education solutions offer interactive instruction for less than a private tutor. • Companies like these can use their technological expertise to create and take advantage of opportunities in the recession environment. 29 (C) 2014 Cengage Learning Inc. All Rights Reserved. Source: Joseph De Avila, "Pursuing an Academic Edge at Home, " The Wall Street Journal, July 23, 2009, D 1 -D 2.

Competitive Advantage Identify sources of competitive advantage 30 (C) 2014 Cengage Learning Inc. All

Competitive Advantage Cost Types of Competitive Advantage Product/Service Differentiation Niche 7 (C) 2014 Cengage

Cost Competitive Advantage u Obtain inexpensive raw materials u Create efficient scale of plant operations u Design products for ease of manufacture u Control overhead costs u Avoid marginal customers 7 (C) 2014 Cengage Learning Inc. All Rights Reserved. 32

Sources of Cost Reduction Experience Curves Product Design Efficient Labor Reengineering No-frills Production Innovations Government Subsidies New Service Delivery Methods 7 (C) 2014 Cengage Learning Inc. All Rights Reserved. 33

Niche Competitive Advantage u Used by small companies with limited resources u May be

Building Sustainable Competitive Advantage u Sustainable competitive advantage is an advantage that cannot be copied by the competition. u A firm that has successfully achieved a competitive advantage will stake out a position unique in some manner from its rivals. 7 (C) 2014 Cengage Learning Inc. All Rights Reserved. 36

Sources of Sustainable Competitive Advantage Patents Copyrights Locations Equipment Technology Skills and Assets of an Organization Customer Service 7 (C) 2014 Cengage Learning Inc. All Rights Reserved. Promotion 37

Setting Marketing Plan Objectives Explain the criteria for stating good marketing objectives 38 (C)

Marketing Objectives u Realistic u Measurable u Time specific u Compared to a benchmark

Criteria for Good Marketing Objectives Carefully specified objectives serve several functions: 1. Communicate marketing management philosophy 2. Provide management direction 3. Motivate employees 4. Force executives to clarify their thinking 8 5. Form a basis for control (C) 2014 Cengage Learning Inc. All Rights Reserved. 40

Describing the Target Market Discuss target market strategies 41 (C) 2014 Cengage Learning Inc.

Describing the Target Marketing Strategy involves… the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets. Marketing Opportunity Analysis (MOA) involves… 9 the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments. (C) 2014 Cengage Learning Inc. All Rights Reserved. 42

Target Market Strategy § Segment the market based on groups with similar characteristics § Analyze the market based on attractiveness of market segments § Select one or more target markets 9 (C) 2014 Cengage Learning Inc. All Rights Reserved. 43

Target Market Strategy Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes 9 (C) 2014 Cengage Learning Inc. All Rights Reserved. 44

The Marketing Mix Describe the elements of the marketing mix 10 45 (C) 2014

The Marketing Mix is… a unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market. The elements of the marketing mix are often referred to as the “Four Ps” 10 (C) 2014 Cengage Learning Inc. All Rights Reserved. 46

Marketing Mix: The “Four Ps” u. The starting point of the “ 4 Ps” Includes: 10 u. Physical unit u. Package u. Warranty u. Service u. Brand u. Image u. Value Product u. Products can be… u Tangible goods u Ideas u Services (C) 2014 Cengage Learning Inc. All Rights Reserved. 47

Marketing Mix: The “Four Ps” Place u. Product availability where and when customers want them u. All activities from raw materials to finished products 10 u. Ensure products arrive in usable condition at designated places when needed (C) 2014 Cengage Learning Inc. All Rights Reserved. 48

Marketing Mix: The “Four Ps” Promotion u Role is to bring about u Includes integration of: exchanges with target u Advertising markets by: u Public relations u Informing u Sales promotion u Educating u Personal selling u Persuading u Reminding 10 (C) 2014 Cengage Learning Inc. All Rights Reserved. 49

Marketing Mix: The “Four Ps” Price u. Price is what a buyer must give up to obtain a product. u. The most flexible of the “ 4 Ps”—quickest to change u. Competitive weapon u. Price x Units Sold = Total Revenue 10 (C) 2014 Cengage Learning Inc. All Rights Reserved. 50

Whole Foods Changes Its Pricing Strategy • As customers face financial struggles, Whole Foods is changing its pricing strategy by: – highlighting deals and sales – pricing items individually instead of per pound – bundle items in bulk discounts 51 (C) 2014 Cengage Learning Inc. All Rights Reserved. Source: Katy Mc. Laughlin and Timothy Martin, "As Sales Slip, Whole Foods Tries Health Push, " Wall Street Journal, August 5, 2009, B 1 9

Following Up on the Marketing Plan Explain why implementation, evaluation, and control of the

Following Up on the Marketing Plan u Implementation u Evaluation and Control u Marketing audit is… u u Comprehensive Systematic Independent Periodic 11 (C) 2014 Cengage Learning Inc. All Rights Reserved. 53

Postaudit Tasks After the audit, three tasks remain 1. Profile and make recommendations about weaknesses and inhibiting factors as well as strengths and new opportunities. 2. Ensure that the role of the audit has been clearly communicated. 3. Make someone accountable for implementing recommendations. 11 (C) 2014 Cengage Learning Inc. All Rights Reserved. 54

Effective Strategic Planning Identify several techniques that help make strategic planning effective 12 55

Techniques for Effective Strategic Planning Continual attention 12 Creativity Management commitment Effective Strategic Planning

Chapter 2 Video The Nederlander Organization is a global theatre management company that backs productions, rents, and manages Broadway style theatres. In this video, major managers discuss the strategic decisions behind the development of a separate company to manage Audience Rewards, a loyalty program for theatre-goers. CLICK TO PLAY VIDEO 57 (C) 2014 Cengage Learning Inc. All Rights Reserved.