Principles of Marketing Chapter 2: Company & Marketing Strategy

Principles of Marketing

Chapter 2:Company &

Marketing Strategy

Strategic Planning

• Managing the strategic fit between one’s goals and capabilities and its changing marketing opportunities.

Adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment.

Focused not on current business but future opportunities

Dr. James Carver – Auburn University

Steps in Strategic Planning

• Corporate level:• i.e., headquarters

Define mission statementSet objectives and goalsDesign business portfolio

• Strategic Business Unit (SBU) level• e.g., a product line, division, single product, or brand

Plan functional strategies for delivering value• Includes marketing planning


Strategic Business Unit (SBU)

• Strategic business unit:A unit of the company that has a separate mission

and objectives and that can be planned independently from other company businesses.

Can be:• A division, • A product line within a division,• A single product or even brand.


Mission Statement

• A mission statement is a statement of the organization’s purpose–what it wants to accomplish in the larger environment.

• It’s a basic description of the fundamental nature, rationale, and direction of the firm.Basically answers “what business are we in?”

• Less than 60% have a written mission statement*


Mission Statement (Cont.)

• Should be crafted at “the most meaningful level of generalization possible”

Should be market oriented, not product oriented• Risk Marketing Myopia

Focused on customer experience, not sales and profits.


Goals and Objectives

• Established as a hierarchy of objectives that “feed” the lower levels:

Business objectives• More about “what” (e.g., increase profits)

Marketing objectives• More about “how” (e.g., increase market share

domestically)


Goals and Objectives (cont.)

• Each manager should have objectives and be responsible for reaching them. Why?

1. Provide direction and guidance to the firm in the formulation of its strategies.

• An [intermediate] “destination” for the firm

2. Establish a standard against which to measure and evaluate future firm performance.

• They minimize the ability for ex post justification


Designing the Business Portfolio

• The collection of businesses and products that make up the company.

• Portfolio planning involves two steps:

1. Analyze current portfolio & decide which should receive more, less, or no investment

2. Shape future portfolio through development and downsizing


Portfolio Analysis

• Steps:1. Identify key SBUs that make up company

2. Assess each SBU’s attractiveness

3. Decide how much support is deserved

• Most analyses are based on 2 factors (BCG):1. Attractiveness of market (i.e., growth rate)

2. Strength within each market (i.e., share)


Boston Consulting Group (BCG) Growth-Share Matrix


Strategies from the BCG Matrix

• Stars: High-share / high-growth• Strategy: Build into cash cow via investment.

• Cash cows: High-share / low-growth• Strategies: Maintain or harvest cash to support STARS.

• Question marks: Low-share / high-growth• Strategies: Build into STAR via investment OR

reallocate funding and let slip into DOG status.

• Dogs: Low-share / low-growth • Strategies: Maintain or divest investments.


Problems with Matrix Approaches

• Several problems exist:

Can be difficult, time consuming, and costly

Difficult to define SBU’s market share & growth rate.

Focus on current businesses, not future planning.


Product/Market Expansion Grid

• An alternative to the Product Matrix approach: Identify growth opportunities based more on

“needs”


From Strategic Planning to Building Relationships

• Marketing plays a key role in strategic planning:Provides a guiding philosophy.

• The marketing concept

Provides input to strategic planners.• Identifies attractive market opportunities

Designs strategies to reach objectives.


The “Integrated Effort” Portionof the Marketing Concept

• Marketers play a vital role, but can’t do it aloneThey Must:

• Manage the internal value chain Cross-functional management

• Coordinate the external value delivery system Interfirm management (e.g., channel management)

“Marketing is Everything” (McKenna HBR 1991)

• Little “m” marketing buy-in is critical


Marketing Strategy and the Marketing Mix

• The goal of marketing strategy is:Create value & build customer relationships

Marketing strategy decisions include:• Market segmentation• Targeting• Differentiation• Positioning

• Marketing strategy guides the marketing mix


Marketing Strategy Decisions

• Segmentation: The process of dividing a market into distinct

groups of buyers who have different needs, characteristics, or behaviors and who might require separate products or marketing programs.

• Targeting: Involves evaluating each market segment’s

attractiveness and selecting one or more segments to enter.


Differentiation and Positioning

• Differentiation:Creating superior customer value by actually

meeting the needs better than the competition* Note: Text defined differentiation with “differentiating”

• Assists in later positioning

• Positioning:Arranging (perceptually*) a product to occupy a

clear, distinctive, and desirable place relative to competing products


The Marketing Mix

• The set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market.These tools are often called the 4 P’s:

• Product• Price• Place (distribution)• Promotion


The 4 Ps and the 4 Cs of the Marketing Mix

• 4 Ps – Seller’s ViewProductPricePlacePromotion

• 4 Cs – Buyer’s ViewCustomer SolutionCustomer CostConvenienceCommunication


Marketing Management

• Four marketing management functions:

Marketing analysis

Marketing planning

Marketing implementation

Marketing control


Developing a Differentiation Strategy

• Firms begin with a SWOT analysis. Internally:

• What are the firm’s relative strengths and weaknesses?

Externally:• What potential threats and opportunities exist within the

market?

• Successful firms will…• Leverage strengths that minimize future threats, and• Correct weaknesses that coincide with market

opportunities


SWOT Analysis

• Strengths:

1. What major competitive advantage(s) do we have?

2. What are we good at?

3. What do customers perceive as our strong points?


SWOT Analysis

• Weaknesses

1. What major competitive advantage(s) do competitors have over us?

2. What are competitors better at than we are?

3. What are our major internal weaknesses?

SWOT Analysis

• Opportunities

1. What favorable environmental trends may benefit our firm?

2. What is the competition doing in our market?

3. What areas of business that are closely related to ours are undeveloped?

SWOT Analysis

• Threats

1. What unfortunate environmental trends may hurt our future performance?

2. What technology is on the horizon that may soon have an impact on our firm?

Marketing Implementation

• Turns marketing plans into marketing actions by addressing:WhoWhereWhenHow

• Implementation can be difficult but is critical to success.


Organizing Marketing Departments

• Four general types of organizations:Functional organization:

• Each marketing activity is headed by a functional specialist.

e.g., sales manager, advertising manager, marketing research manager, etc.

Most common form

Geographic organization: • Sales and marketing people are assigned to specific

countries, regions, and/or districts. Best for firms that sell internationally or across country


Marketing Department Organization (cont.)

Product management organization:• One person is responsible for complete strategy and

marketing program for a single product Best for firms that sell many different products and/or brands

Market (or customer) organization:• Manager responsible for particular market or type of

customer Best for firms that sell one product line to many different

markets

Or some combination thereof…


Marketing Control Process

• Marketing control involves four steps:Set goalsMeasure performanceEvaluate performanceTake corrective action

• In essence it’s “Closed Loop” marketing*


Documents

Principles of Marketing Chapter 2: Company & Marketing Strategy