Strategic Planning for Competitive Advantage Chapter 2 Prepared

Strategic Planning for Competitive Advantage Chapter 2 Prepared by Deborah Baker Texas Christian University Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 1

Learning Objectives 1. Understand the importance of strategic marketing and know a basic outline for a marketing plan. 2. Develop an appropriate business mission statement. 3. Describe the criteria for stating good marketing objectives. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 2

Learning Objectives (continued) 4. Explain the components of a situation analysis. 5. Identify sources of competitive advantage. 6. Identify strategic alternatives and describe tools used to help select alternatives. 7. Discuss target market strategies. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 3

Learning Objectives (continued) 8. Describe elements of the marketing mix. 9. Explain why implementation, evaluation, and control of the marketing plan are necessary. 10. Identify several techniques that help make strategic planning possible. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 4

1 On Line http: //www. coach. com http: //www. vuitton. com http: //www. katespade. com Learning Objective Understand the importance of strategic marketing and know a basic outline for a marketing plan. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 5

1 Strategic Planning On Line http: //www. coke. com http: //www. pepsi. com The managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 6

1 Strategic Planning EVOLVING MARKET OPPORTUNITIES LONG RUN PROFITABILITY AND GROWTH RESOURCES & OBJECTIVES Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 7

1 Strategic Marketing Planning § What is the organization’s main activity? § How will it reach its goals? The Marketing Plan Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 8

1 Planning The process of anticipating future events and determining strategies to achieve organizational objectives in the future. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 9

1 The Marketing Plan A written document that acts as a guidebook of marketing activities for the marketing manager. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 10

1 Why Write a Marketing Plan? ü Provides a basis for comparison of actual and expected performance ü Provides clearly stated activities to work toward common goals ü Serves as a reference for the success of future activities ü Allows entry into the marketplace with awareness Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning g in t ke n r Ma Pla 11

1 Business Mission Statement On Line http: //www. dmusic. com Marketing Plan Process Objectives Situation or SWOT Analysis Marketing Strategy Target Market Strategy Marketing Mix Product Distribution Promotion Price Implementation Evaluation Control Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 12

2 Learning Objective Develop an appropriate business mission statement. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 13

2 Defining the Business Mission On Line http: //www. att. com § Answers the question, “What business are we in and where are we going? ” § Focuses on the market(s) rather than the good or service § Strategic Business Units may also have a mission statement Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 14

2 AMA’s Mission Statement Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 15

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 16

2 Strategic Business Units (SBUs) 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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 17

3 Learning Objective Describe the criteria for stating good marketing objectives. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 18

3 Marketing Objective A statement of what is to be accomplished through marketing activities. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 19

3 Marketing Objectives Must Be: § Realistic § Measurable § Time specific § Consistent with Organization’s Priorities Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning “Our objective is to increase market share by 40% and to obtain customer satisfaction ratings of at least 90% in 2003. ” 20

3 Examples of Marketing Objectives Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 21

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 22

4 Learning Objective Explain the components of a situation analysis. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 23

4 SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 24

4 SWOT Analysis S W O T Things the company does well. Internal External 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 Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 25

4 SWOT Analysis Strengths and Weaknesses INTERNAL u Production Costs u Marketing Skills u Employee Capabilities u Financial Resources u Available Technology u Company/Brand Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning Image 26

4 SWOT Analysis Opportunities And Threats EXTERNAL u. Social u. Demographic u. Economic u. Technological u. Political/Legal u. Competitive Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 27

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 28

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 29

5 Learning Objective Identify sources of competitive advantage Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 30

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 31

5 Competitive Advantage On Line http: //www. travelocity. com Cost Types of Competitive Advantage Product/Service Differentiation Niche Strategies Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 32

5 Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 33

5 Cost Competitive Advantage § Obtain inexpensive raw materials § Create efficient operations § Design products for manufacture § Control overhead costs § Avoid marginal customers Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 34

5 Sources of Cost Reduction Experience Curves Product Design Efficient Labor Reengineering No-frills Production Innovations Government Subsidies New Delivery Methods Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 35

5 Product/Service Differentiation 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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 36

Examples of Product/Service Differentiation 5 § Brand names § Strong dealer network § Product reliability § Image § Service Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 37

Niche Competitive Advantage 5 Advantage achieved when a firm seeks to target and effectively serve a small segment of the market. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 38

5 Niche Competitive Advantage § Used by small companies with limited resources § May be used in a limited geographic market § Product line may be focused on a specific product line Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 39

Sustainable Competitive Advantage 5 An advantage that cannot be copied by the competition. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 40

Sources of Sustainable Competitive Advantage 5 Patents Copyrights Locations Equipment Technology Organization’s Skills and Assets Customer Service Promotion Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 41

6 Learning Objective Identify strategic alternatives and describe tools used to help select alternatives. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 42

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 43

6 Strategic Opportunity Matrix On Line http: //www. pg. com Present Product New Product Present Market Penetration Product Development New Market Development Diversification Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 44

6 Selecting a Strategic Alternative Common Tools Philosophy Profitability Portfolio Matrix $ Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning Market Share 45

6 Portfolio Matrix Tools for allocating resources among products or strategic business units on the basis of relative market share and market growth rate. $ ? Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 46

6 BCG Portfolio Matrix HIGH LOW MARKET GROWTH RATE MARKET SHARE DOMINANCE Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning LOW ? $ 47

6 BCG Portfolio Matrix MARKET SHARE DOMINANCE HIGH LOW MARKET GROWTH RATE HIGH $ High growth Market leaders Require cash Large profits Low growth High market share High cash flow Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning LOW High growth Low market share Need cash Poor profit margins Low growth Low market share Minimal cash flow 48

6 BCG Portfolio Matrix Example MARKET SHARE DOMINANCE HIGH LOW MARKET GROWTH RATE HIGH Sub. Notebooks and Hand-Held Computer STAR Laptop and Personal Computers CASH COW Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning LOW Integrated phone/Palm devices PROBLEM CHILD Mainframe Computer DOG 49

6 Strategies for Resource Allocation 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 Increase short-term cash return. Appropriate for all SBUs except Stars. Get rid of SBUs with low shares in low-growth markets. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 50

7 Learning Objective Discuss target market strategies. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 51

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 52

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 53

7 Target Market Selections Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 54

7 Target Market Strategy Develop a marketing mix that will produce satisfying exchanges with target markets Product Place Promotion Price Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 55

8 Learning Objective Describe elements of the marketing mix. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 56

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 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 57

8 Marketing Mix: The “Four Ps” Price Promotion Place Product Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 58

8 Product Strategies § The starting point of the “ 4 Ps” Product Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning § Includes physical unit, package, warranty, service, brand, image, and value 59

8 Distribution (Place) Strategies Place § Product availability where and when customers want them. § Involves all activities from raw materials to finished products Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 60

8 Promotion Strategies On Line http: //www. paramount. com http: //www. warnerbros. com http: //www. universalstudios. com Promotion § Role is to bring about exchanges with target markets § Includes integration of personal selling, advertising, sales promotion, and public relations Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 61

8 Pricing Strategies Price § The most flexible of the “ 4 Ps” § Price X Units Sold = Total Revenue Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 62

9 Learning Objective On Line http: //www. youngbiz. com Explain why implementation, evaluation, and control of the marketing plan are necessary. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 63

9 Following Up the Marketing Plan u Implementation u Evaluation u Control u Marketing Audit §Comprehensive §Systematic §Independent §Periodic Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 64

9 The Marketing Audit A thorough, systematic, periodic evaluation of the goals, strategies, structure, and performance of the marketing organization. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 65

10 Learning Objective Identify several techniques that help make strategic planning effective. Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 66

10 Effective Strategic Planning Continual Attention Requirements for Effective Strategic Planning Creativity Management Commitment Chapter 2 Marketing 7 e Lamb Hair Mc. Daniel © 2004 South-Western/Thomson Learning 67