CHAPTER%202%20Strategic%20Planning%20and%20the%20Marketing%20Environment:%20The%20Advantage%20is%20Undeniable

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CHAPTER 2Strategic Planning and the Marketing
EnvironmentThe Advantage is Undeniable
M A R K E T I N G
Real People, Real Choices Fourth Edition
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Three levels of Business Planning

• Business planning is the managerial decision
  process that matches the organizations resources
  and capabilities to its market opportunities
• Strategic Planning
• top level managers
• Long term growth
• Organization wide perspective
• Functional planning
• middle level functional managers
• Generally annual
• Functional perspective
• Operational Planning
• lower level and front-line managers
• Daily / weekly / monthly
• Tactical perspective

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Strategic Planning Steps

• 1. Define the organizations mission
• Evaluate internal/external environments
• a. Situation Analysis / SWOT analysis
• Set organizational or SBU objectives
• SBU Strategic Business Unit self-contained
  divisions representing different areas of
  business within the firm
• Disney SBUs Theme parks, movie studios, TV
  networks and cruise lines
• Establish the business portfolio

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What could the mission statement contain

• What business are we in?
• Products / services, etc. both present and
  potential in future
• What customers should we serve?
• All segments, current and potential in future
• How should we best serve our customers?
• What will be uniquely yours in your delivery of
  the product to your customers

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Good mission statements are

• Visionary
• Sufficiently broad
• Realistic
• Motivational
• Short and concise
• Easily understood

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Some mission statements

• McDonalds "McDonald's vision is to be the
  world's best quick service restaurant experience.
  Being the best means providing outstanding
  quality, service, cleanliness, and value, so that
  we make every customer in every restaurant
  smile."
• J. Sainsbury "Our mission is to be the
  consumer's first choice for food, delivering
  products of outstanding quality and great service
  at a competitive cost through working faster,
  simpler, and together."
• Levi-Strauss "We will market the most appealing
  and widely worn casual clothing in the world. We
  will clothe the world."

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Sample Mission Statements

• MADD To stop drunk driving, support the victims
  of this violent crime, and prevent underage
  drinking.
• Under Armour To find new technology and enhance
  the performance of every athlete and outdoorsman.
  Lighter. Faster. Stronger. Better.

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Evaluate the Environment

• Internal Environment
• Strengths
• Weaknesses
• External Environment
• Opportunities
• Threats

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Sample SWOT Analysis Starbucks
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Strengths

• Profitable and cash rich
• Revenues climbing at 20
• Stock up 56 since last year
• Over 300 million in cash
• Almost zero long term debt
• Over 4 billion in annual sales
• 268 million in profits last year

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Strengths

• High brand equity
• We willingly pay 1.75 for a cup of coffee which
  we used to pay 50 cents for
• Consumers inelastic to price increase
• Brand equity valued at 2 billion
• Over 25 million people visit Starbucks each week
• Consumers willing to pay a price premium
• High brand loyalty (millions of latte dependent
  customers)

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Strengths

• Unique consumption experience
• Ambience, music, décor, coffee sounds smells,
  internet surfing, a place to hang out over an
  occasional cup of coffee
• the third place after home and work
• a safe, comfortable and secure place. A place
  you belong to

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Strengths

• Quality of management
• Concerned for welfare of employees
• Full medical benefits
• High employee loyalty
• Well, I read in Howards book
• Globally experienced top management
• From Pepsico, Dell, Walmart, etc.

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Weaknesses

• Overcapitalized
• Sacrifices higher growth rates through debt
• Inflexible management
• No franchising
• Slow to respond to local / regional situations
• Too much centralized control

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Opportunities

• Café life a culture which has never existed
  before in the US
• Relatively inelastic coffee consumption

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Threats

• Wal-Mart and Kicks Coffee
• trading down as a result of recession
• Coffee, cigarettes and café culture seem to go
  together

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Strategic Plan for Starbucks

• Strength profitable and cash-rich
• Threat New potentially damaging competition
  (Wal-mart Kicks)
• Strategy indicated Use resources to reinforce
  its positioning and introduce another coffee
  brand at a lower price point to compete with
  Walmart and Kicks coffee (and other similar
  start-ups).

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Strategic Plan for Starbucks

• Objective Strengthen Starbucks existing
  perceptions, AND
• Split the market at the lower end create
  competition for Wal-mart. In the process move
  Starbucks beyond competition

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Set Objectives

• SBU objectives must support the overall
  objectives of the firm
• Customer satisfaction
• Profitability
• Market standing
• ROI
• Revenue
• Collaborative process

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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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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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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
??? Problem children
High
Market Growth Rate
Dogs
Cash Cows
Low
High
Low
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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BCG Matrix

• Can you categorize Disneys SBUs into the BCG
  matrix?
• Cash Cows Disney Pictures (animated family
  films)
• Dogs none
• Stars Touchstone Studios (films for adult
  moviegoers)
• Problem Children Disney Stores (retail)

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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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Product Market Growth Strategies
Market Development
Diversification
New
Market
Product Development
Market Penetration
Existing
Existing
New
Product
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Product Market Growth Strategies

• Market Penetration (existing product for existing
  market)
• Customization
• Increase market share
• E.g. The Shuffle for the mobile music market
• Market Development (existing product for a new
  market)
• Difficult strategy
• You dont know the new market as well as your
  existing market
• E.g. Big Macs sold in India

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Product Market Growth Strategies

• Product Development (new product for existing
  market)
• Preferred strategy since you know the consumer
  well
• E.g. Nike selling athletic sportswear to its core
  market segment of athletes
• Diversification (new product for new market)
• E.g. McDonalds acquiring Boston Market, Aroma
  Café, Chipotle Mexican Grills, etc.

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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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The Internal Business Environment

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

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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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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 e.g.
  to slake thirst you may drink water, soda, juice,
  etc.
• Level 3 brand competition in which competitors
  offering similar products compete for consumer
  choice e.g. different brands of soda available.

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Competition The Macroenvironment

• Overall structure of industry
• monopoly - when one seller controls market e.g.
  ATT before its break up into baby Bells,
  Microsoft.
• oligopoly - relatively small number of sellers,
  each with a substantial share of market (e.g.
  Aircraft manufacture)
• monopolistic competition - many sellers compete
  for buyers each offers a slightly different
  product and has a small share of market (most
  industrial sectors)
• perfect competition - many small sellers each
  offering the same product (e.g. foreign exchange,
  stocks, etc.)

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The Technological Environment

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

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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
• The trend to stay healthy has benefited organic
  foods, health clubs, athletic apparel and shoes,
  etc. and hurt the fast food industry