M A R K E T I N G

Real People, Real Choices Fourth Edition

CHAPTER 2

Strategic Planning and the Marketing Environment: The Advantage is Undeniable

Michael R. Solomon Greg W. Marshall Elnora W. Stuart

Chapter Objectives

• Explain the strategic planning process • Describe the steps in the marketing planning process • Explain operational planning • Discuss important aspects of an organization’s internal environment • Explain why marketers scan an organization’s external business environment 2-2

• Business plans – guide entire organization or its business units – Bplans.com provides several examples

Business Planning

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Marketing Plans

• Describe the marketing environment • Outline marketing strategies • Identify plans for implementation and evaluation 2-4

Strategic Planning

• Strategic planning is the managerial decision process that matches the organization’s resources and capabilities to its market opportunities for long-term growth • Firms may become multi-product companies with self-contained divisions – Strategic Business Units (SBUs) – Example: The Walt Disney Company 2-5

Figure 2.1: Planning at Different Levels

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Lower Levels of Planning

•

Functional

–

Conducted by mid-level managers

–

Includes Marketing as well as Finance, Operations, HRM, etc.

•

Operational

–

Conducted by first-line managers

–

Includes day-to day execution of tactical plans

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Operational Planning

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Strategic Planning Steps Define the organization’s mission Evaluate internal/external environments Set objectives Establish the business portfolio

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Define the Organization’s Mission

• A mission may begin with these questions: – What business are we in?

– What customers should we serve?

– How should we develop the firm’s capabilities and focus its efforts?

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Sample Mission Statements

• MADD: To stop drunk driving, support the victims of this violent crime, and prevent underage drinking.

• Armour: To find new technology and enhance the performance of every athlete and outdoorsman. Lighter. Faster. Stronger. Better.

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Evaluate the Internal/External Environment Strengths Weaknesses Opportunities Threats

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Set Organizational and SBU Objectives

• SBU objectives must support the overall objectives of the firm 2-13

Establish the Business Portfolio

• For firms with different SBUs, planning also includes allocating resources among the businesses • Each SBU is a separate profit center within the larger corporation • Each SBU is responsible for its own costs, revenues, and profits 2-14

Crest

Crest toothpaste products are part of P&G’s portfolio that ranges from personal care products to coffee 2-15

Figure 2.2: The Role of SBUs

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Portfolio Management

• The range of products owned by a large firm is called a business portfolio • Portfolio analysis allows a firm to assess the potential of its products and businesses – BCG Growth-Market Share Matrix 2-17

Boston Consulting Group

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Figure 2.3: BCG Matrix

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BCG Matrix

• Method focuses on the potential of a firm’s existing successful products to generate cash that the firm can then use to invest in new products • New products are chosen for their potential to become future cash generators • Two dimensions: – Market growth rate – Relative market share 2-20

BCG Matrix: Stars

• SBUs with dominant market share in high-growth markets – requires funding to keep up with production and promotion demands – strategies seek to maximize market share in the face of increasing competition 2-21

BCG Matrix: Cash Cows

• SBUs with dominant market share in a low-growth potential market – product is well established and market share can be maintained with minimal funding – firms milk cows of profits to fund growth of other products in portfolio – too many cows can become a liability due to the lack of growth potential 2-22

BCG Matrix: Question Marks

• SBUs with low market shares in fast growth markets – sometimes called problem children – the firm has failed to compete effectively • The dilemma? Investing more money into the SBU may: – improve market share in a high potential market OR – result in negative cash flow and failure 2-23

BCG Matrix: Dogs

• SBUs with small market share in a slow growth market – specialized products in limited markets unlikely to grow – firms may sell dogs to smaller firms or eliminate product from market 2-24

Disney emphasizes its movie brand for grownups as a star

Disney’s Touchstone

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Developing Growth Strategies

• Product-Market Growth Matrix illustrates different growth strategies – Two dimensions • opportunities for growth in existing or new markets • allocating resources into existing products or new products – Four strategies result 2-26

Figure 2.4: Product-Market Growth Matrix

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Steps in the Marketing Planning Process

1. Perform a situation analysis 2. Set marketing objectives 3. Develop marketing strategies – Select a target market – Develop marketing mix strategies 4. Implement marketing strategies 5. Monitor and control strategies 2-28

Under Armour Woman

Under Armour targets athletes of both sexes who seek moisture control when they play or work out 2-29

Part of Jet Blue’s product strategy is to provide in flight diversions to bored passengers

Jet Blue

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Operational Planning

• Day-to-day execution of the marketing plan • Performed by first-line supervisors • Timed over 1-2 months 2-31

The Internal Business Environment

• Corporate Resources and Competencies • Corporate Culture – Risk-Taking Cultures – Profit-Centered versus People Centered Cultures 2-32

Where to Work

• Fortune Magazine publishes a list of the top places to work - these represent balanced firms emphasizing people and profit – J.M. Smucker 2-33

The Economic Environment

• The Business Cycle – All economies go through cycles of prosperity, recession, and recovery – The cycle directly affects marketers because of its effect on consumer behavior • The Power of Expectations – Consumer confidence represents consumer beliefs about what the future holds – Like business cycles, it affects whether consumers buy or cut back on spending 2-34

Consumer Confidence Index

Source: http://www.conference-board.org/economics/consumerconfidence/index.cfm posted July 27, 2004 2-35

The Competitive Environment

• Analyzing the Competition – Strengths and weaknesses analysis – Competitive intelligence (CI) • Competition in the Microenvironment • Competition in the Macroenvironment 2-36

Competition: The Microenvironment

• In the microenvironment, competition means the

alternatives

from which the target may choose • Level 1: competition for

discretionary income

(for income left after a consumer pays for necessities) • Level 2:

product

competition in which different products attempt to satisfy the same needs or wants • Level 3:

brand

competition in which competitors offering similar products compete for consumer choice 2-37

Competition: The Macroenvironment

• Overall structure of industry – monopoly - when one seller controls market – oligopoly - relatively small number of sellers, each with a substantial share of market – monopolistic - many sellers compete for buyers; each offers a slightly different product and has a small share of market – perfect competition - many small sellers each offering the same product 2-38

Competition: The Macroenvironment Share of Market per Firm:

High

Monopoly Oligopoly Monopolistic Competition Perfect Competition Number of Firms in Market:

High Low Low 2-39

The Technological Environment

• Technology is an investment a firm must make to succeed • Patents protect inventions 2-40

The Legal Environment

• Regulatory Agencies – Food and Drug Administration – Federal Trade Commission – Federal Communications Commission – Interstate Commerce Commission – Consumer Product Safety Commission – Environmental Protection Agency 2-41

The Sociocultural Environment

• Characteristics of society • Characteristics of people in that society • Cultural values and beliefs 2-42

Issues for Discussion_1

• Do you think the BCG Matrix is a useful way for organizations to examine their businesses? What are some examples of product lines that fit in each category?

• Do you think planning is essential to a firm’s success? Can planning ever hurt?

• Can you identify organizations that should have contracted rather than expanded? 2-43

Issues for Discussion_2

• What are some ways that the technological environment has changed marketing? What predications might you make for how technology will change marketing in the future?

• What are the advantages and disadvantages of governmental controls of marketing? What new laws would you recommend?

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