Strategic Planning for Competitive Advantage CHAPTER 2 Marketing Lamb, Hair, McDaniel 9 Designed by Eric Brengle B-books, Ltd Prepared by Deborah Baker Texas Christian University

The Nature of Strategic Planning LOI Understand the importance of strategic marketing and know a basic outline for a marketing plan 2

Strategic Planning LOI Strategic Planning The managerial process of creating and maintaining a fit between the organization’s objectives and resources and evolving market opportunities. The goal is long-term profitability and growth. 3

Strategic Marketing Management Chapter 2 Strategic Planning for Competitive Advantage Strategic Marketing Management LOI What is the organization’s main activity? How will it reach its goals? THE ANSWER IS A MARKETING PLAN. 4 4

Strategic Planning LOI Marketing Plan Chapter 2 Strategic Planning for Competitive Advantage Strategic Planning LOI Marketing Plan A written document that acts as a guidebook of marketing activities for the marketing manager. Notes: A sustainable competitive advantage lasts only as long as the time it takes a competitor to imitate the strategy and plans. Marketing managers should continually look for skills and assets that create and sustain competitive advantage. A sustainable competitive advantage is a function of the speed with which competitors can imitate a company’s strategy and plans. Imitation requires a competitor to identify the leader’s competitive advantage, determine how it is achieved, and learn how to duplicate it. Discussion/Team Activity: Discuss examples of firms that have sustainable competitive advantage in each skill and asset source listed. 5 5

Why Write a Marketing Plan? Provides a basis for comparison of actual and expected performance Provides clearly stated activities to work toward common goals Serves as a reference for the success of future activities Provides an examination of the marketing environment Allows entry into the marketplace with awareness LOI 6

Elements of a Strategic Marketing Plan Mission statement Marketing objectives Situation analysis Competitive advantage Strategic Directions 7

Defining the Business Mission LO2 Develop an appropriate business mission statement 8

Defining the Business Mission Chapter 2 Strategic Planning for Competitive Advantage LO2 Answers the question, “What business are we in?” Focuses on the market(s) rather than the good or service Strategic Business Units (SBUs) may also have a mission statement Notes: Performance of a situation (SWOT) analysis helps firms identify their competitive advantage. Strengths and Weaknesses are an internal assessment. Opportunities and Threats are an external environment assessment. Discussion/Team Activity: Perform a SWOT analysis for companies within the same industry. How could you use this information if you worked for a particular company or for a competitive company? 9 9

Setting Marketing Plan Objectives Chapter 2 Strategic Planning for Competitive Advantage Setting Marketing Plan Objectives LO3 Describe the criteria for stating good marketing objectives Notes: Strategic planning creates and maintains a fit between the organization’s resources and objectives and the evolving market opportunities. The goal is to sustain and increase long-run profitability and growth. Strategic decisions require long-term commitments of resources. Strategic errors can threaten a firm’s survival, but a good plan can help protect and grow the firm. Examples of strategic decisions: * Sears purchase of Lands’ End * Reebok’s decision to stop competing with Nike in the hard-core sports market and instead focus on being the top shoe brand for fashion-forward consumers. * McDonald’s decision to offer more healthful foods * S.C. Johnson’s introduction of Shout Color Catchers Discussion/Team Activity: Discuss strategic planning decisions of other companies. Discuss why strategic planning is important for these companies. 10 10

Marketing Objective LO3 Marketing Objective A statement of what is to be accomplished through marketing activities. 11

Marketing Objectives LO3 Realistic Measurable Time specific Chapter 2 Strategic Planning for Competitive Advantage Marketing Objectives Realistic Measurable Time specific Consistent with and indicate the organization’s priorities “Our objective is to achieve 10 percent dollar market share in the cat food market within 12 months of product introduction.” Notes: Examples of Strategic Alternatives Market Penetration: Manufacturer cents-off coupons McDonald’s Happy Meals with Ty’s Teeny Beanie Babies Market Development: Expansion into global markets by companies such as McDonald’s, Coca-Cola, and Pepsi Product development: Brooks Brothers Joseph A. Bank Clothiers Diversification: LTV Corporation, a steel producer, diversified into the monorail business Coca-Cola’s water-treatment and water-conditioning equipment LO3 12 12

Conducting a Situation Analysis LO4 Explain the components of a situation analysis 13

SWOT Analysis LO4 SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) 14

S W O T SWOT Analysis LO4 Internal External ©South-Western College Publishing S W O T Things the company does well. Things the company does not do well. Conditions in the external environment that favor strengths. Conditions in the external environment that do not relate to existing strengths or favor areas of current weakness. Internal External LO4 15

Competitive Advantage LO5 Identify sources of competitive advantage 16

Competitive Advantage LO5 Competitive Advantage The set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition. 17

Competitive Advantage LO5 Niche Strategies Cost Product/Service Differentiation Types of Competitive Advantage 18

Cost Competitive Advantage LO5 Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins. 19

Cost Competitive Advantage LO5 Obtain inexpensive raw materials Create efficient plant operations Design products for ease of manufacture Control overhead costs Avoid marginal customers 20

Sources of Cost Reduction LO5 Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design Reengineering Production Innovations New Service Delivery Methods 21

Product/Service Differentiation LO5 Product / Service Differentiation Competitive Advantage The provision of something that is unique and valuable to buyers beyond simply offering a lower price than the competition’s. 22

Examples of Product/Service Differentiation LO5 Brand names Strong dealer network Product reliability Image Service 23

Niche Competitive Advantage LO5 Niche Competitive Advantage The advantage achieved when a firm seeks to target and effectively serve a small segment of the market. 24

Niche Competitive Advantage LO5 Used by small companies with limited resources May be used in a limited geographic market Product line may be focused on a specific product category 25

Sources of Sustainable Competitive Advantage LO5 Patents Copyrights Locations Equipment Technology Customer Service Promotion Skills and Assets of an Organization 26

Identify strategic alternatives Strategic Directions LO6 Identify strategic alternatives 27

Strategic Alternatives LO6 Market Penetration Market Development Product Development Diversification Increase market share among existing customers Attract new customers to existing products Introduce new products into new markets Create new products for present markets 28

Describing the Target Market LO7 Discuss target market strategies 29

Marketing Strategy LO7 Marketing Strategy The activities of selecting and describing one or more target markets and developing and maintaining a market mix that will produce mutually satisfying exchanges with target markets. 30

Target Market Strategy LO7 Segment the market based on groups with similar characteristics Analyze the market based on attractiveness of market segments Select one or more target markets 31

Target Market Strategy LO7 Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes 32