1. McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Describe two kinds of organizations and the three levels of strategy in them. LO1 Describe how core values, mission, organizational culture, business, and goals are important to organizations. Explain why managers use marketing dashboards and metrics. LO3 LO2 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 2, YOU SHOULD BE ABLE TO: 2-2

3. Discuss how an organization assesses where it is now and seeks to be. Explain the three steps of the planning phase of the strategic marketing process. LO4 LO5 LEARNING OBJECTIVES (LO) AFTER READING CHAPTER 2, YOU SHOULD BE ABLE TO: Describe the elements of the implementation and evaluation phases of the strategic marketing process. LO6 2-3

4. WHERE AN “A” IN A CORRESPONDENCE COURSE IN ICE CREAM MAKING CAN LEAD! 2-4

5.  Organization TODAY’S ORGANIZATIONS KINDS OF ORGANIZATIONS LO1  Offerings  Business Firm  Nonprofit Organization  Industry Profit 2-5

6. MAKING RESPONSIBLE DECISIONS The Global Dilemma: How to Achieve Sustainable Development LO1 2-6

7. FIGURE 2-A FIGURE 2-A How an industry is structured 2-7

8. TODAY’S ORGANIZATIONS What is Strategy? LO1  Strategy Strategy  Can’t Be “All Things to All People” 2-8

9. FIGURE 2-1 FIGURE 2-1 The board of directors oversees the three levels of strategy in organizations: corporate, business unit, and functional 2-9

10.  Corporate Level Corporate Level TODAY’S ORGANIZATIONS STRUCTURE—CORPORATE LO1  Chief Marketing Officer (CMO) Eduardo Conrado Motorola Cammie Dunaway Nintendo 2-10

11. TODAY’S ORGANIZATIONS STRUCTURE—SBU LO1  Strategic Business Unit (SBU) Strategic Business Unit (SBU)  Strategic Business Unit (SBU) Level GE Technology Infrastructure (healthcare & transportation) GE Energy Infrastructure (energy, oil & gas, water) GE Consumer & Industrial ( Lighting, appliances, etc.) GE Capital ( Commercial Finance, GE Money) 2-11

12. TODAY’S ORGANIZATIONS STRUCTURE—FUNCTIONAL LO1  Functional Level Functional Level  Department  Cross-Functional Teams Cross-Functional Teams 2-12

13. FIGURE 2-2 FIGURE 2-2 Visionary organizations: (1) establish a foundation, (2) set a direction, and (3) create strategies to successfully develop and market their offerings 2-13

14. STRATEGY IN VISIONARY ORGANIZATIONS ORGANIZATIONAL FOUNDATION (WHY)  Core Values Core Values  Stakeholders  Organizational Culture Organizational Culture  Mission or Vision Mission or Vision LO2 Mission Statement 2-14

15. Star Trek Enterprise Why is a mission statement important? LO2 2-15

16. Medtronic’s “Rising Figure” Mural What does it signify to stakeholders? LO2 2-16

17. What do we do? What business are we really in?  Business Business STRATEGY IN VISIONARY ORGANIZATIONS ORGANIZATIONAL DIRECTION (WHAT) LO2  Business Model 2-17

18. MARKETING MATTERS The NetFlix Launch and Its Continually… Continually… Continually…Changing Business Model! LO2 2-18

19. Profit Sales ($ or #) Market Share Customer Satisfaction Employee Welfare Social Responsibility Quality Efficiency  Goals or Objectives Goals or Objectives STRATEGY IN VISIONARY ORGANIZATIONS ORGANIZATIONAL DIRECTION (WHAT) LO2 2-19

20. STRATEGY IN VISIONARY ORGANIZATIONS ORGANIZATIONAL DIRECTION (WHAT) LO2  Goals or Objectives: S.M.A.R.T. Goals or Objectives: S.M.A.R.T. Specific Measurable Relevant Attainable Time-Based 2-20

21. STRATEGY IN VISIONARY ORGANIZATIONS ORGANIZATIONAL DIRECTION (HOW) LO2  Variation by Level  Variation by Offering Corporate SBU Functional Product Service Idea 2-21

22.  Car Dashboards and Marketing Dashboards Car Dashboards and Marketing Dashboards  Dashboards, Metrics, and Plans STRATEGY IN VISIONARY ORGANIZATIONS MARKETING DASHBOARDS AND METRICS LO3 Marketing Metric Marketing Plan 2-22

23. FIGURE 2-3 FIGURE 2-3 An effective marketing dashboard like Oracle’s helps managers assess a business situation at a glance 2-23

24. FIGURE 2-B FIGURE 2-B Elements in typical marketing and business plans targeted at different audiences 2-24

25. USING MARKETING DASHBOARDS How Well is Ben & Jerry’s Doing? Dollar Sales and Dollar Market Share LO3 2-25

26. Competitive Advantage SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? LO4  Competencies  Customers 2-26

27.  Competitors Who are the Competitors of Lands’ End? SETTING STRATEGIC DIRECTIONS WHERE ARE WE NOW? LO4 2-27

28. SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? LO4  Business Portfolio Analysis (BCG) Business Portfolio Analysis (BCG) Market Growth Rate Stars Cash Cows Dogs Question Marks Relative Market Share High Low 2-28

29. Kodak Consumer-Related Products What SBU type in the BCG growth-share matrix? Kodak digital picture frameKodak film Kodak digital photo printerKodak digital camera LO4 2-29

30. FIGURE 2-4 FIGURE 2-4 BCG business portfolio analysis for Kodak’s consumer SBUs for 2003 (solid circle) and 2010 (hollow circle) Kodak digital photo printer Kodak digital picture frame ① ② ④ ③ Kodak film sales: US, Canada, & W. Europe Kodak digital camera 2-30

31. SETTING STRATEGIC DIRECTIONS WHERE DO WE WANT TO GO? LO4  Diversification Analysis Diversification Analysis Market Penetration Market Development Product Development Diversification 2-31

32. FIGURE 2-5 FIGURE 2-5 Four alternative market-product strategies for Ben & Jerry’s to expand sales revenues using diversification analysis 2-32

33. THE STRATEGIC MARKETING PROCESS LO5 How Do We Allocate Our Resources to Get Where We Want to Go?  Strategic Marketing Process Strategic Marketing Process How Do We Convert Our Plans to Actions? How Do Our Results Compare With Our Plans and Do Deviations Require New Plans? 2-33

34. FIGURE 2-6 FIGURE 2-6 The strategic marketing process has three phases: planning, implementation, and evaluation 2-34

35. THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE  Weaknesses  Strengths  Threats  Opportunities LO5 Situation Analysis SWOT Analysis  Step 1: Situation (SWOT) Analysis 2-35

36. THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE  Analyze Competitors  Identify Industry Trends  Research Present and Prospective Customers  Assess the Organization LO5 SWOT Analysis Study  Step 1: Situation (SWOT) Analysis 2-36

37. FIGURE 2-7 FIGURE 2-7 Ben & Jerry’s SWOT analysis that serves as the basis for management actions regarding growth 2-37

38.  Correct a Weakness  Build on a Strength  Avoid a Disaster- Laden Threat  Exploit an Opportunity SWOT Analysis Actions  Step 1: Situation (SWOT) Analysis THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO5 2-38

39. Market Segmentation Points of Difference  Step 2: Market-Product Focus and Goal Setting THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO5 2-39

40. Set Marketing & Product Goals Select Target Markets Find Points of Difference Position the Product  Example: Medtronic’s Pacemaker THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO5 2-40

41. Product Strategy Price Strategy Promotion Strategy Place (Distribution) Strategy  Step 3: Marketing Program THE STRATEGIC MARKETING PROCESS THE PLANNING PHASE LO5 2-41

42. FIGURE 2-8 FIGURE 2-8 The elements of the marketing mix must be blended to produce a cohesive marketing program 2-42

43. THE STRATEGIC MARKETING PROCESS THE IMPLEMENTATION PHASE LO6  Obtaining Resources  Designing the Marketing Organization  Developing Planning Schedules  Executing the Marketing Program Marketing Strategy Marketing Tactics 2-43

44. FIGURE 2-9 FIGURE 2-9 Organization of a typical manufacturing firm, showing a breakdown of the marketing department 2-44

45. THE STRATEGIC MARKETING PROCESS THE EVALUATION PHASE Exploiting a Positive Deviation Correcting a Negative Deviation  Acting on Deviations Planning Gap  Comparing Results with Plans to Identify Deviations LO6 2-45

46. FIGURE 2-10 FIGURE 2-10 The evaluation phase requires that Kodak compare actual results with goals to identify and act on deviations to fill in the “planning gap” by 2010 2-46

47. BP: TRANSFORMING ITS STRATEGY “BEYOND PETROLEUM” VIDEO CASE 2 2-47

48. VIDEO CASE 2 BP 1. (a) What is BP’s “Helios” strategy? (b) How does this strategy relate to BP’s mission and core values? 2-48

49. VIDEO CASE 2 BP 2. Conduct a SWOT (strengths, weaknesses, opportunities, and threats) analysis for BP’s “Helios” initiative—looking forward globally to the next three years. 2-49

50. VIDEO CASE 2 BP 3. What are some ways BP could use to effectively communicate its “Helios” strategy to consumers? 2-50

51. 4. What are the long-term benefits to (a) society and (b) BP of its “Helios” initiative? VIDEO CASE 2 BP 2-51

52. 5. Looking at BP’s Helios Power marketing strategy and its “street team” marketing tactic: (a) What objectives would you set for this tactic? (b) How would you propose BP measure the results? VIDEO CASE 2 BP 2-52

53. Profit Profit is the money left after a business firm’s total expenses are subtracted from its total revenues and is the reward for the risk it undertakes in marketing its offerings. 2-53

54. Strategy Strategy is an organization’s long-term course of action designed to deliver a unique customer experience while achieving its goals. 2-54

55. Corporate Level The corporate level is the level in an organization where top management directs overall strategy for the entire organization. 2-55

56. Strategic Business Unit (SBU) A strategic business unit (SBU) is a subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly defined group of customers. 2-56

57. Functional Level The functional level is the level in an organization where groups of specialists actually create value for the organization. 2-57

58. Cross-Functional Teams Cross-functional teams consist of a small number of people from different departments in an organization who are mutually accountable to accomplish a task or common set of performance goals. 2-58

59. Core Values Core values are the fundamental, passionate, and enduring principles of an organization that guide its conduct over time. 2-59

60. Mission A mission is a statement of the organization’s function in society, often identifying its customers, markets, products, and technologies. The term is often used interchangeably with vision. 2-60

61. Organizational Culture An organizational culture consists of the set of values, ideas, attitudes, and norms of behavior that is learned and shared among the members of an organization. 2-61

62. Business A business is the clear, broad, underlying industry or market sector of an organization’s offering. 2-62

63. Goals or Objectives Goals or objectives are the statements of an accomplishment of a task to be achieved, often by a specific time. 2-63

64. Market Share Market share is the ratio of sales revenue of the firm to the total sales revenue of all firms in the industry, including the firm itself. 2-64

65. Marketing Dashboard A marketing dashboard is the visual display of the essential information related to achieving a marketing objective. 2-65

66. Marketing Metric A marketing metric is a measure of the quantitative value or trend of a marketing activity or result. 2-66

67. Marketing Plan A marketing plan is a road map for the marketing activities of an organization for a specified future time period, such as one year or five years. 2-67

68. Competitive Advantage A competitive advantage is an unique strength relative to competitors that provides superior returns, often based on quality, time, cost, or innovation. 2-68

69. Business Portfolio Analysis Business portfolio analysis is a technique that managers use to quantify performance measures and growth targets to analyze its clients’ strategic business units (SBUs) as though they were a collection of separate investments. 2-69

70. Diversification Analysis Diversification analysis is a tool that helps a firm search for growth opportunities from among current and new markets as well as current and new products. 2-70

71. Strategic Marketing Process The strategic marketing process is the approach whereby an organization allocates its marketing mix resources to reach its target markets. 2-71

72. Situation Analysis A situation analysis involves taking stock of where the firm or product has been recently, where it is now, and where it is headed in terms of the organization’s marketing plans and the external factors and trends affecting it. 2-72

73. SWOT Analysis A SWOT analysis is an acronym describing an organization’s appraisal of its internal Strengths and Weaknesses and its external Opportunities and Threats. 2-73

74. Market Segmentation Market segmentation involves aggregating prospective buyers into groups, or segments, that (1) have common needs and (2) will respond similarly to a marketing action. 2-74

75. Points of Difference Points of difference are those characteristics of a product that make it superior to competitive substitutes. 2-75

76. Marketing Strategy Marketing strategy is the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it. 2-76

77. Marketing Tactics Marketing tactics are the detailed day-to-day operational decisions essential to the overall success of marketing strategies. 2-77