Strategic Market Planning: Take the Big Picture Chapter Two

Strategic Market Strategic Market Planning:Planning:

Take the Big PictureTake the Big Picture

Chapter TwoChapter Two

2-2© 2012 Pearson Education, Inc. publishing as Prentice-Hall.

Chapter ObjectivesChapter Objectives

Explain business planning and its Explain business planning and its three levelsthree levels

Describe the steps in strategic Describe the steps in strategic planningplanning

Describe the steps in marketing Describe the steps in marketing planningplanning


Real People, Real Choices: Real People, Real Choices: Decision Time at First FlavorDecision Time at First Flavor

Should Jay diversify into new product Should Jay diversify into new product categories or focus on gaining market categories or focus on gaining market acceptance for Peel ‘n Taste? acceptance for Peel ‘n Taste? • Option 1:Option 1: Investigate all three new Investigate all three new

business ideasbusiness ideas

• Option 2:Option 2: Focus on Peel ‘n Taste only Focus on Peel ‘n Taste only until it gains market acceptanceuntil it gains market acceptance

• Option 3:Option 3: Focus on Peel ‘n Taste but Focus on Peel ‘n Taste but investigate limited investment in investigate limited investment in launching one of the new productslaunching one of the new products


Business Planning:Business Planning:Compose the Big PictureCompose the Big Picture

Business Planning:Business Planning: Ongoing process of making decisions Ongoing process of making decisions that guides the firm both in the short that guides the firm both in the short term and for the long termterm and for the long term

• Identifies/builds on firm’s strengthsIdentifies/builds on firm’s strengths

• Helps managers make informed Helps managers make informed decisionsdecisions

• Develops objectives before action is Develops objectives before action is takentaken


Ethics Is Up Front Ethics Is Up Front in Marketing Planningin Marketing Planning

Business ethics: Business ethics:

• Basic values that guide a firm’s Basic values that guide a firm’s behaviorbehavior

Code of ethics: Code of ethics:

• Written standards of behavior to which Written standards of behavior to which everyone in the organization must everyone in the organization must subscribesubscribe

How to Write a Code of Ethics


It’s DebatableIt’s DebatableClass Discussion QuestionClass Discussion Question

Reverse mortgages (also called lifetime mortgages) are Reverse mortgages (also called lifetime mortgages) are available to individuals 62 or older. Reverse mortgages available to individuals 62 or older. Reverse mortgages release the equity in the home BACK to the property release the equity in the home BACK to the property owner in either monthly payments or one lump sum, and owner in either monthly payments or one lump sum, and defer the loan repayment until the owner dies, the home defer the loan repayment until the owner dies, the home is sold, or the owner leaves the property for at least 365 is sold, or the owner leaves the property for at least 365 days (for example, goes into a nursing home or moves days (for example, goes into a nursing home or moves to a second home during the winter months). to a second home during the winter months).

Is it ethical for mortgage bankers to offer such products Is it ethical for mortgage bankers to offer such products to consumers?to consumers? Where do you stand?Where do you stand?


Figure 2.1Figure 2.1Three Levels of Business Three Levels of Business

PlanningPlanning


Managerial decision process that Managerial decision process that matches firm’s resources and matches firm’s resources and capabilities to its market opportunities capabilities to its market opportunities for long-term growth and survivalfor long-term growth and survival

• Top management defines firm’s Top management defines firm’s purpose and objectivespurpose and objectives

• Strategic business units (SBUs) are Strategic business units (SBUs) are common in large firmscommon in large firms

Strategic PlanningStrategic Planning


Functional PlanningFunctional Planning

Accomplished by various functional Accomplished by various functional areas of firm, such as marketingareas of firm, such as marketing

Typically includes:Typically includes:

• A broad three-to-five-year plan to A broad three-to-five-year plan to support the strategic plan support the strategic plan

• A detailed annual planA detailed annual plan


Operational PlanningOperational Planning

First-line managers focus on day-to-First-line managers focus on day-to-day execution of functional plansday execution of functional plans

Typically includes one or more of the Typically includes one or more of the following: following:

• Detailed annual plansDetailed annual plans

• Semiannual plansSemiannual plans

• Quarterly plansQuarterly plans


All Business Planning All Business Planning Is an Integrated ActivityIs an Integrated Activity

Strategic, functional, and operational Strategic, functional, and operational plans must work together to benefit the plans must work together to benefit the whole firmwhole firm

• Plans are guided by firm’s missionPlans are guided by firm’s mission

Planners at all levels must keep the Planners at all levels must keep the “big picture” in mind when planning“big picture” in mind when planning


Strategic Planning: Strategic Planning: Frame the PictureFrame the Picture

Very large multiproduct firms may have Very large multiproduct firms may have divisions called strategic business divisions called strategic business units (SBUs)units (SBUs)

• SBUs operate like separate businessesSBUs operate like separate businesses

Strategic planning is done at both the Strategic planning is done at both the corporate and SBU levelscorporate and SBU levels


Figure 2.2Figure 2.2Steps in Strategic PlanningSteps in Strategic Planning


Strategic Planning Step 1: Strategic Planning Step 1: Define the MissionDefine the Mission

Key questions in determining the mission:Key questions in determining the mission:

• What business are we in? What business are we in?

• What customers should we serve? What customers should we serve?

• How do we develop firm’s capabilities and How do we develop firm’s capabilities and focus its efforts?focus its efforts?

Mission statementMission statement

• A formal document that describes the firm’s A formal document that describes the firm’s overall purpose and what it hopes to achieve overall purpose and what it hopes to achieve in terms of its customers, products, and in terms of its customers, products, and resourcesresources


Step 1: Define the MissionStep 1: Define the Mission

Examples of mission statementsExamples of mission statements

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

• National Book Swap:National Book Swap: “to become the “to become the nation’s largest book club and in the nation’s largest book club and in the process bring a lifetime of reading process bring a lifetime of reading material to every American.”material to every American.”


More on Mission More on Mission StatementsStatements

Had Xerox continued Had Xerox continued to define their to define their mission in terms of mission in terms of producing copy producing copy machines instead of machines instead of providing “document providing “document solutions”, today’s solutions”, today’s digital age would digital age would have made their have made their product and firm product and firm obsolete.obsolete.


Step 2: Evaluate the Internal Step 2: Evaluate the Internal and External Environmentsand External Environments

Situational analysisSituational analysis

• An assessment of a firm’s internal and An assessment of a firm’s internal and external environmentsexternal environmentsInternal environmental assessment:Internal environmental assessment:

identifies the firm’s strengths and identifies the firm’s strengths and weaknesses weaknesses

External environmental assessment: External environmental assessment: identifies opportunities and threatsidentifies opportunities and threats


Internal EnvironmentInternal Environment

Controllable Controllable elements elements inside a firm inside a firm that influence that influence how well the how well the firm operatesfirm operates

Name some Name some examplesexamples

Southwest Airlines’ employees reflect Southwest Airlines’ employees reflect the “Southwest Spirit” and are the “Southwest Spirit” and are considered a key strength of the firm.considered a key strength of the firm.


External EnvironmentExternal Environment

Elements outside the firm that may Elements outside the firm that may affect it either positively or negatively.affect it either positively or negatively.

The external environment is global and The external environment is global and requires consideration of:requires consideration of:

• Legal/political/ethical trendsLegal/political/ethical trends

• Economic trendsEconomic trends

• Competitive trendsCompetitive trends

• Technological trendsTechnological trends

• Sociocultural trendsSociocultural trends Visit Trendwatching.com


Trends Present OpportunitiesTrends Present Opportunities

Recent Recent sociocultural sociocultural trends influencing trends influencing food marketing food marketing stem from an stem from an obesity epidemic in obesity epidemic in the U.S. and the U.S. and consumer desires consumer desires for low fat, for low fat, and organic foodsand organic foods


SWOT AnalysisSWOT Analysis

An analysis of an organization’s An analysis of an organization’s strengths strengths (S)(S) and weaknesses and weaknesses (W)(W) and and the opportunities the opportunities (O)(O) and threats and threats (T)(T) in in the external environmentthe external environment

SWOTSWOT enables the firm to develop enables the firm to develop strategies that maximize strengths and strategies that maximize strengths and capitalize upon opportunitiescapitalize upon opportunities


Table 2.2 Part ATable 2.2 Part AExample of a Partial SWOT Example of a Partial SWOT

Analysis for McDonald’sAnalysis for McDonald’s


Table 2.2 Part BTable 2.2 Part BExample of a Partial SWOT Example of a Partial SWOT

Analysis for McDonald’sAnalysis for McDonald’s


Step 3: Set OrganizationalStep 3: Set Organizationalor SBU Objectivesor SBU Objectives

Organizational/SBU Objectives:Organizational/SBU Objectives:

• What the firm hopes to accomplish with What the firm hopes to accomplish with long-range business planlong-range business plan

Need to be specific, measurable, Need to be specific, measurable, attainable and sustainableattainable and sustainable

• May be financially focused, or focused May be financially focused, or focused on other factors such as satisfactionon other factors such as satisfaction


Step 4: Establish the Business Step 4: Establish the Business PortfolioPortfolio

Business portfolio: Business portfolio:

• The group of different products or The group of different products or brands owned by a firm and having brands owned by a firm and having different income-generating and growth different income-generating and growth capabilitiescapabilities

Portfolio analysisPortfolio analysis

• Assesses the potential of a firm’s SBUsAssesses the potential of a firm’s SBUs

• BCG growth-market share matrixBCG growth-market share matrix


Figure 2-3Figure 2-3Boston Consulting Group (BCG) Boston Consulting Group (BCG)

MatrixMatrix


Stars Can Be Grown or Stars Can Be Grown or AcquiredAcquired

The recent The recent acquisition of acquisition of Marvel Comics will Marvel Comics will most likely add to most likely add to the entertainment the entertainment company’s stable company’s stable of starsof stars


Step 5: Develop Growth Step 5: Develop Growth StrategiesStrategies

Product-market growth matrix:Product-market growth matrix:

• Characterizes different growth Characterizes different growth strategies according to type of market strategies according to type of market and type of productand type of product

Jeep’s product Jeep’s product development development strategy offers strategy offers different vehicles different vehicles for different needsfor different needs


Figure 2-4Figure 2-4Product-Market Growth MatrixProduct-Market Growth Matrix


Marketing PlanningMarketing Planning

Step 1: Perform a situation analysisStep 1: Perform a situation analysis• Builds on SWOT; identifies how Builds on SWOT; identifies how

environmental trends affect the environmental trends affect the marketing planmarketing plan

Step 2: Set marketing objectivesStep 2: Set marketing objectives• Specific to the firm’s brands and other Specific to the firm’s brands and other

marketing mix-related elementsmarketing mix-related elements

• States what the marketing function States what the marketing function must accomplish if firm is to achieve its must accomplish if firm is to achieve its overall business objectivesoverall business objectives


Marketing Planning: Step 3Marketing Planning: Step 3

Develop marketing Develop marketing strategies to achieve strategies to achieve marketing objectivesmarketing objectives

• Select target Select target market(s) where the market(s) where the firm’s offerings are firm’s offerings are best suitedbest suited

• Develop marketing Develop marketing mix strategiesmix strategies


Marketing Mix StrategiesMarketing Mix Strategies

Product strategies:Product strategies:

• Include product design, packaging, Include product design, packaging, branding, support services, and product branding, support services, and product variations and featuresvariations and features

Pricing strategies:Pricing strategies:

• Include setting prices for final Include setting prices for final consumers, wholesalers, and consumers, wholesalers, and retailers based on costs, demand, retailers based on costs, demand, or competitors’ pricesor competitors’ prices

First FlavorVideo


Marketing Mix StrategiesMarketing Mix Strategies

Promotion strategies: Promotion strategies:

• Advertising, sales Advertising, sales promotion, public promotion, public relations, direct relations, direct marketing, personal marketing, personal sellingselling

Distribution (place) Distribution (place) strategies: strategies:

• How, when, and where How, when, and where the product is available the product is available to targeted customersto targeted customers


Step 4: Implement and ControlStep 4: Implement and Controlthe Marketing Planthe Marketing Plan

Control: Control: • Measuring actual performance, Measuring actual performance,

comparing performance to the comparing performance to the objectives, making adjustmentsobjectives, making adjustments

Marketing metrics: Marketing metrics: • Return on marketing investment (ROMI) Return on marketing investment (ROMI)

Action plans:Action plans:• Support plans that guide the execution Support plans that guide the execution

and control of marketing strategies at and control of marketing strategies at the the operational leveloperational level


Metrics MomentMetrics Moment

ROMI is the revenue or ROMI is the revenue or profit margin generated by profit margin generated by investmentinvestment in a specific in a specific marketing program marketing program divided by the cost of that divided by the cost of that program (expenditure) at a program (expenditure) at a given risk level, as given risk level, as determined by determined by managementmanagement $$


Table 2.4Table 2.4Template for an Action PlanTemplate for an Action Plan


Operational Planning:Operational Planning:Day-to-Day Execution of PlansDay-to-Day Execution of Plans

At the operational level, plans focus At the operational level, plans focus on the day-to-day execution of the on the day-to-day execution of the marketing planmarketing plan

• Created by first-line managersCreated by first-line managers

• Cover short time framesCover short time frames

• Marketing metrics gauge Marketing metrics gauge successsuccess


Real People, Real Choices: Real People, Real Choices: Decision Made at First FlavorDecision Made at First Flavor

Jay chose option 3Jay chose option 3• Why do you think Jay chose to focus on Why do you think Jay chose to focus on

Peel ‘n Taste until it gained market Peel ‘n Taste until it gained market acceptance, while also investigating the acceptance, while also investigating the opportunity to launch one of the new opportunity to launch one of the new products with limited resources?products with limited resources?


Keep It Real:Keep It Real: Fast-Forward to Fast-Forward to Next Class Decision Time at eBayNext Class Decision Time at eBay

Meet Robert Chatwani, General Meet Robert Chatwani, General Business Manager of eBayBusiness Manager of eBay

eBay is developing a new online eBay is developing a new online marketplace to help small producers marketplace to help small producers and artisans gain global accessand artisans gain global access

The decision to be made: The decision to be made: How to create a marketplace for small How to create a marketplace for small producers and artisans that would producers and artisans that would maximize long-term revenue maximize long-term revenue and social impact and social impact


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Strategic Market Planning: Take the Big Picture Chapter Two