CHAPTER 2 Strategic Planning and the Marketing Environment Real People, Real Choices CHAPTER 2 Strategic Planning and the Marketing Environment

Chapter Objectives Explain the strategic planning process Describe the steps in the marketing planning process Explain operational planning Discuss important aspects of an organization’s internal environment Explain why marketers scan an organization’s external business environment

Describe the marketing environment Outline marketing strategies Marketing Plans Describe the marketing environment Outline marketing strategies Identify plans for implementation & evaluation

Strategic Planning Strategic planning: the managerial decision process that matches the organization’s resources & capabilities to its market opportunities for long-term growth Firms may become multi-product companies with self-contained divisions Strategic Business Units (SBUs) Example: General Mills

Strategic Planning Steps 1. Define the organization’s mission (management) 2. Evaluate internal/external environments (marketing) 3. Set organizational or SBU objectives (management) 4. Establish the business portfolio (management)

Evaluate the Environment Internal Environment Strengths Weaknesses External Environment Opportunities Threats

Set Objectives SBU objectives must support the overall objectives of the firm Customer satisfaction Sales Market share

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, & profits

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

BCG Matrix Method focuses on the potential of a firm’s existing successful products to generate cash that the firm can use to invest in new products New products are chosen for their potential to become cash generators Two dimensions: Market growth rate Relative market share

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

SBUs with dominant market share in a low-growth potential market 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

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

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

Developing Growth Strategies Product-Market Growth Matrix illustrates different growth strategies Market penetration: increase sales in existing markets Market development: introduce existing products to new markets Product development: introduce new products to existing markets Diversification: introduce new products in new markets

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

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 consumer spending

The Competitive Environment Analyzing the Competition Strengths and weaknesses analysis Competitive intelligence (CI) Competition in the Microenvironment Competition in the Macroenvironment

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 or wants Level 3: brand competition in which competitors offering similar products compete for consumer choice

Competition: The Macroenvironment Overall structure of industry monopoly - when one seller controls market oligopoly - relatively small number of sellers, each with a substantial share of market monopolistic - many sellers compete for buyers; each offers a slightly different product and has a small share of market perfect competition - many small sellers each offering the same product

The Technological Environment Technology is an investment a firm must make to succeed Patents protect inventions Trends in electronic commerce eBay Amazon

The Legal Environment Laws impact industries Regulatory Agencies impact industries Food and Drug Administration Federal Trade Commission

The Sociocultural Environment Characteristics of society Demographics Geographics Psychographics Cultural values & beliefs

Issues for Discussion What are some examples of product lines that fit in each category of the BCG matrix? Do you think planning is essential to a firm’s success? Can planning ever hurt? Can you identify organizations that should have contracted rather than expanded?

Issues for Discussion What are some ways that the technological environment has changed marketing? What are the advantages & disadvantages of governmental controls of marketing?