Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared by Deborah Baker, Texas Christian University Lamb, Hair, McDaniel CHAPTER Strategic Planning for Competitive Advantage

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 2 Learning Outcomes Understand the importance of strategic marketing and know a basic outline for a marketing plan Develop an appropriate business mission statement Describe the criteria for stating good marketing objectives LO 1 LO 2 LO 3

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 3 Learning Outcomes Explain the components of a situation analysis Identify sources of competitive advantage Identify strategic alternatives Discuss target market strategies LO 4 LO 6 LO 7 LO 5

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 4 Learning Outcomes Describe the elements of the marketing mix Explain why implementation, evaluation, and control of the marketing plan are necessary Identify several techniques that help make strategic planning effective LO 8 LO 9 LO 10

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 5 LO 1 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. Strategic Planning

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 6 LO 1 Strategic Marketing Management What is the organization’s main activity? How will it reach its goals? THE ANSWER IS A MARKETING PLAN.

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 7 LO 1 Strategic Planning A written document that acts as a guidebook of marketing activities for the marketing manager. Marketing Plan

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 8 LO 1 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

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 9 LO 1 Marketing Plan Elements Marketing Strategy ProductDistribution Price Marketing Mix Business Mission Statement Objectives Situation or SWOT Analysis Target Market Strategy Implementation Evaluation Control Promotion

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 10 REVIEW LEARNING OUTCOME LO 1 The Importance of Strategic MarketingWhatWhatWhyWhy HowHow Strategic Planning Long-term profitability and growth Write a marketing plan Online

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 11 LO 2 Defining the Business Mission  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

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 12 LO 2 AMA’s Mission Statement

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 13 LO 2 Strategic Business Units (SBUs) Characteristics: [SBU HAS…]  A distinct mission and specific target market  Control over its resources  Its own competitors  Plans independent of other SBUs

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 14 REVIEW LEARNING OUTCOME LO 2 Business Mission Statement Q: What business are we in? A: Business mission statement Too narrow Too broad Just right marketing myopia no direction focus on markets served and benefits customers seek

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 15 Marketing Objective LO 3 A statement of what is to be accomplished through marketing activities. Marketing Objective

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 16 Marketing Objectives LO 3  Realistic  Measurable  Time specific  Consistent with and indicating the priorities of the organization “Our objective is to achieve 10 percent dollar market share in the cat food market within 12 months of product introduction.”

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 17 REVIEW LEARNING OUTCOME LO 3 Criteria for Good Marketing Objectives Realistic, measurable, and time-specific objectives consistent with the firm’s objectives: 1. Communicate marketing management philosophy 2. Provide management direction 3. Motivate employees 4. Force executives to think clearly 5. Allow for better evaluation of results

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 18 LO 4 SWOT Analysis Identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T) SWOT Analysis

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 19 LO 4 SWOT Analysis ©South-Western College Publishing S S W W O O T 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

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 20 LO 4 Environmental Scanning The collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan. Environmental Scanning Environmental Scanning

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 21 REVIEW LEARNING OUTCOME LO 4 Components of a Situation Analysis  production costs  marketing skills  financial resources  image  technology Strengths Weaknesses INTERNAL ENVIRONMENT

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 22 REVIEW LEARNING OUTCOME LO 4 Components of a Situation Analysis  social  demographic  economic  technological  political / legal  competitive Opportunities Threats EXTERNAL ENVIRONMENT

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 23 Competitive Advantage LO 5 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.

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 24 Competitive Advantage LO 5 Niche Strategies Cost Product/Service Differentiation Types of Competitive Advantage

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 25 Cost Competitive Advantage LO 5 Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins.

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 26 Cost Competitive Advantage LO 5  Obtain inexpensive raw materials  Create efficient plant operations  Design products for ease of manufacture  Control overhead costs  Avoid marginal customers

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 27 Sources of Cost Reduction LO 5 Experience Curves Efficient Labor No-frills Products Government Subsidies Product Design Reengineering Production Innovations New Service Delivery Methods

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 28 Product/Service Differentiation LO 5 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.

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 29 Examples of Product/Service Differentiators LO 5  Brand names  Strong dealer network  Product reliability  Image  Service

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 30 Niche Competitive Advantage LO 5 Niche Competitive Advantage The advantage achieved when a firm seeks to target and effectively serve a small segment of the market.

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 31 Niche Competitive Advantage LO 5  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

Chapter 2Copyright ©2009 Cengage Learning Inc. All rights reserved. 32 Sources of Sustainable Competitive Advantage LO 5 Patents Copyrights Locations Equipment Technology Customer Service Promotion Skills and Assets of an Organization Skills and Assets of an Organization

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 33 REVIEW LEARNING OUTCOME LO 5 Sources of Competitive Advantage Cost $ Product/Service Differentiation A vs. B vs. C Niche Strategies

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 34 Strategic Alternatives LO 6 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

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 35 Ansoff’s Strategic Opportunity Matrix LO 6 Present ProductNew Product New Market Market Penetration Market Development Product Development Diversification Present Market Online

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 36 Portfolio Matrix LO 6 Stars Cash Cows Problem Children Dogs

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 37 Portfolio Matrix Strategies LO 6 Build Hold Harvest Divest

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 38 REVIEW LEARNING OUTCOME LO 6 Strategic Alternatives Identify strategic alternatives Diversification = Product development = products Market development = customers Market penetration = share new products + new markets

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 39 Marketing Strategy LO 7 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. Marketing Strategy Marketing Strategy

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 40 Target Market Strategy LO 7  Segment the market based on groups with similar characteristics  Analyze the market based on attractiveness of market segments  Select one or more target markets

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 41 Target Market Strategy LO 7 Appeal to the entire market with one marketing mix Concentrate on one marketing segment Appeal to multiple markets with multiple marketing mixes

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 42 REVIEW LEARNING OUTCOME LO 7 Target Market Strategies Entire MarketMultiple MarketsSingle Market Target Market Options

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 43 The Marketing Mix LO 8 A unique blend of product, distribution, promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market. Marketing Mix

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 44 Marketing Mix: The “Four Ps” LO 8 Price Promotion Place Product

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 45 Marketing Mix: The “Four Ps” LO 8  The starting point of the “4 Ps”  Includes  Physical unit  Package  Warranty  Service  Brand  Image  Value Product  Products can be…  Tangible goods  Ideas  Services

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 46 Marketing Mix: The “Four Ps” LO 8  Product availability where and when customers want them  All activities from raw materials to finished products  Ensure products arrive in usable condition at designated places when needed Place

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 47 Marketing Mix: The “Four Ps” LO 8 Promotion Online  Role is to bring about exchanges with target markets by:  Informing  Educating  Persuading  Reminding  Includes integration of:  Personal selling  Advertising  Sales promotion  Public relations

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 48 Marketing Mix: The “Four Ps” LO 8 Price  Price is what a buyer must give up to obtain a product.  The most flexible of the “4 Ps”-- quickest to change  Competitive weapon  Price x Units Sold = Total Revenue

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 49 REVIEW LEARNING OUTCOME LO 8 Elements of the Marketing Mix

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved Following Up on the Marketing Plan LO 9  Implementation  Evaluation  Control  Marketing audit is…  Comprehensive  Systematic  Independent  Periodic Online

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 51 REVIEW LEARNING OUTCOME LO 9 Implementation, Evaluation, and Control Product Place Promotion Price Product Place Promotion Price Objectives met? ImplementationEvaluation Audits comprehensive systematic independent periodic Audits comprehensive systematic independent periodic

Chapter 2 Copyright ©2009 Cengage Learning Inc. All rights reserved 52 REVIEW LEARNING OUTCOME LO 10 Techniques for Effective Strategic Planning Effective Strategic Planning Continual attention Creativity Management commitment Management commitment