CHAPTER 2 Strategic Planning and the Marketing Environment: The Advantage is Undeniable

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CHAPTER 2Strategic Planning and the Marketing
Environment The Advantage is Undeniable
M A R K E T I N G
Real People, Real Choices Fourth Edition
Michael R. Solomon Greg W. Marshall
Elnora W. Stuart
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Chapter Objectives

• Explain the strategic planning process
• Describe the steps in the marketing planning
  process
• Explain operational planning
• Discuss important aspects of an organizations
  internal environment
• Explain why marketers scan an organizations
  external business environment

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Business Planning

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

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Marketing Plans

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

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Strategic Planning

• Strategic planning is the managerial decision
  process that matches the organizations 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

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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 organizations mission
Evaluate internal/external environments
Set objectives
Establish the business portfolio
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Define the Organizations Mission

• A mission may begin with these questions
• What business are we in?
• What customers should we serve?
• How should we develop the firms 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
Weaknesses
Strengths
Opportunities
Threats
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Set Organizational and SBU Objectives

• SBU objectives must support the overall
  objectives of the firm

Profitability
Customer Satisfaction
Market Standing
Revenue and Sales
Return on Investment
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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

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Crest
Crest toothpaste products are part of PGs
portfolio that ranges from personal care products
to coffee
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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

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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 firms
  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

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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

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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

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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

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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

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Disneys Touchstone
Disney emphasizes its movie brand for grownups as
a star
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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

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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

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Under Armour Woman
Under Armour targets athletes of both sexes who
seek moisture control when they play or work out
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Jet Blue
Part of Jet Blues product strategy is to provide
in-flight diversions to bored passengers
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Operational Planning

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

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The Internal Business Environment

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

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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

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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

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Consumer Confidence Index
Source http//www.conference-board.org/economics/
consumerconfidence/index.cfm posted July 27, 2004
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The Competitive Environment

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

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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

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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

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Competition The Macroenvironment
Share of Market per Firm High Low
Number of Firms in Market High Low
Monopoly Oligopoly Monopolistic
Competition Perfect Competition
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The Technological Environment

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

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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

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The Sociocultural Environment

• Characteristics of society
• Characteristics of people in that society
• Cultural values and beliefs

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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 firms
  success? Can planning ever hurt?
• Can you identify organizations that should have
  contracted rather than expanded?

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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?