MKTG 351 Chapter 2

The four basic strategies

1. Build 2. Hold 3. Harvest 4. Divest

Ansoff's Strategic Opportunity Matrix

1. Market penetration 2. Market development 3. Product development 4. Diversification

The portfolio matrix breaks SBUs into four categories:

1. Stars 2. Cash Cows 3. Problem kids 4. Dogs

Time specific

By what time should the objective be met? ex) "To increase sales of Purina brand cat food between January 1, 2014, and December 31, 2014."

Marketing planning

designing activities relating to marketing objectives and the changing marketing environment Marketing planning is the basis for all marketing strategies and decisions.

SWOT analysis

identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)

Cash cows

in the portfolio matrix, a business unit that generates more cash than it needs to maintain its market share It is in a low-growth market, but the product has a dominant market share. The basic strategy for a cash cow is to maintain market dominance by being the price leader and making technological improvements in the product. Managers should resist pressure to extend the basic line unless they can dramatically increase demand. Instead, they should allocate excess cash to the product categories where growth prospects are the greatest. For example, Heinz has two cash cows: ketchup and Weight Watchers frozen dinners.

Dogs

in the portfolio matrix, a business unit that has low growth potential and a small market share Most dogs eventually leave the marketplace. In the computer manufacturer example, the mainframe computer has become a dog. Another example is BlackBerry's smartphone line, which started out as a star for its manufacturer.

Stars

in the portfolio matrix, a business unit that is a fast-growing market leader ex) Star SBUs usually have large profits but need lots of cash to finance rapid growth. The best marketing tactic is to protect existing market share by reinvesting earnings in product improvement, better distribution, more promotion, and production efficiency. Management must capture new users as they enter the market.

Problem children = Question Mark

in the portfolio matrix, a business unit that shows rapid growth but poor profit margins. Problem children need a great deal of cash. Without cash support, they eventually become dogs. The strategy options are to invest heavily to gain better market share, acquire competitors to get the necessary market share, or drop the SBU. Sometimes a firm can reposition the products of the SBU to move them into the star category.

SBU has the following characteristics:

A distinct mission and a specific target market Control over its resources Its own competitors A single business or a collection of related businesses Plans independent of the other SBUs in the total organization. Each SBU has its own rate of return on investment, growth potential, and associated risks, and requires its own strategies and funding.

Post-Audit Tasks

After the audit has been completed, three tasks remain. First, the audit should profile existing weaknesses and inhibiting factors, as well as the firm's strengths and the new opportunities available to it. The second task is to ensure that the role of the audit has been clearly communicated. The final post-audit task is to make someone accountable for implementing recommendations.

FOUR CHARACTERISTICS OF A MARKETING AUDIT

Comprehensive, Systematic, Independent, Periodic

Product design

Cutting-edge design technology can help offset high labor costs. ex) Reverse engineering—the process of disassembling a product piece by piece to learn its components and obtain clues as to the manufacturing process—can also mean savings. Reverse engineering a low-cost competitor's product can save research and design costs. The car industry often uses reverse engineering.

Strategic Planning Strategies

Effective strategic planning requires continual attention, creativity, and management commitment

Divest 처분하다[없애다]

Getting rid of SBUs with low shares of low-growth markets is often appropriate. Problem children and dogs are most suitable for this strategy.

Government subsidies

Governments can provide grants and interest-free loans to target industries. Such government assistance enabled Japanese semiconductor manufacturers to become global leaders.

Writing the Marketing Plan

Having a good marketing information system and a wealth of competitive intelligence is critical to a thorough and accurate situation analysis. The role of managerial intuition is also important in the creation and selection of marketing strategies. Managers must weigh any information against its accuracy and their own judgment when making a marketing decision. Further, every marketing plan has different content, depending on the organization, its mission, objectives, targets, and marketing mix components. There is not one single correct format for a marketing plan. Marketing plan can have their own distinctive format or terminology Marketing plan should be unique to the firm for which it was created.

Hold

If an SBU is a very successful cash cow, a key goal would surely be to hold or preserve market share so that the organization can take advantage of the very positive cash flow.

Build

If an organization has an SBU that it believes has the potential to be a star (probably a problem child at present), building would be an appropriate goal. The organization may decide to give up short-term profits and use its financial resources to achtieve his goal.

Compared to a benchmark

If the objective is to increase sales by 15 percent, it is important to know the baseline against which the objective will be measured ex) "To increase sales of Purina brand cat food by 15 percent over 2012 sales of $300 million."

Efficient labor

Labor costs can be an important component of total costs in low-skill, labor-intensive industries such as product assembly and apparel manufacturing. ex) Many U.S. publishers and software developers send data entry, design, and formatting tasks to India, where skilled engineers are available at lower overall cost.

Measurable

Managers need to be able to quantitatively measure whether or not an objective has been met.

Realistic

Managers should develop objectives that have a chance of being met.

No-frills goods and services

Marketers can lower costs by removing frills and options from a product or service. ex) Southwest Airlines, for example, offers low fares but no seat assignments or meals. Low costs give Southwest a higher load factor and greater economies of scale, which, in turn, mean lower prices.

New methods of service delivery

Medical expenses have been substantially lowered by the use of outpatient surgery and walk-in clinics

Place (Distribution) Strategies

Place, or distribution, strategies are concerned with making products available when and where customers want them.

Pricing Strategies

Price is what a buyer must give up in order to obtain a product the most flexible of the four Ps—the quickest element to change. Marketers can raise or lower prices more frequently and easily than they can change other marketing mix variables. Price is an important competitive weapon and is very important to the organization because price multiplied by the number of units sold equals total revenue for the firm.

Production innovations

Production innovations such as new technology and simplified production techniques help lower the average cost of production.

Promotion Strategies

Promotion includes advertising, public relations, sales promotion, and personal selling. A good promotion strategy, like using a beloved cartoon character such as SpongeBob SquarePants to sell gummy snacks, can dramatically increase sales.

MARKETING OBJECTIVES SHOULD BE...

Realistic, Measurable. Time specific, Compared to a benchmark

Reengineering

Reengineering entails fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical measures of performance

Product Strategies

The heart of the marketing mix, the starting point, is the product offering and product strategy. The product includes not only the physical unit but also its package, warranty, after-sale service, brand name, company image, value, and many other factors. Products can be tangible goods such as computers, ideas like those offered by a consultant, or services such as medical care. Products should also offer customer value.

Comprehensive

The marketing audit covers all the major marketing issues facing an organization—not just trouble spots.

Independent

The marketing audit is normally conducted by an inside or outside party that is independent enough to have top management's confidence and has the ability to be objective.

Periodic

The marketing audit should be carried out on a regular schedule instead of only in a crisis. Whether it seems successful or is in deep trouble, any organization can benefit greatly from such an audit.

Systematic

The marketing audit takes place in an orderly sequence and covers the organization's marketing environment, internal marketing system, and specific marketing activities. The diagnosis is followed by an action plan with both short-run and long-run proposals for improving overall marketing effectiveness.

Harvest

This strategy is appropriate for all SBUs except those classified as stars. The basic goal is to increase the short-term cash return without too much concern for the long-run impact. It is especially worthwhile when more cash is needed from a cash cow with long-run prospects that are unfavorable because of a low market growth rate.

SBU can use to manage the strategic direction of its portfolio of businesses.

Three of the most commonly used tools are 1. Ansoff's strategic opportunity matrix 2. the Boston Consulting Group model 3. the General Electric model

The Boston Consulting Group Model

To determine the future cash contributions and cash requirements expected for each SBU, managers can use the Boston Consulting Group's portfolio matrix.

Why Write a Marketing Plan?

Writing a marketing plan allows you to examine the marketing environment in conjunction with the inner workings of the business. It serves as a reference point for the success of future activities. It allows the marketing manager to enter the marketplace with an awareness of possibilities and problems.

Market development

a marketing strategy that entails attracting new customers to existing products ex) New Product & Present market Starbucks develops powdered instant coffee called Via.

Product development

a marketing strategy that entails the creation of new products for present markets ex) Present Product & New Market Starbucks opens stores in Brazil and Chile.

Market penetration

a marketing strategy that tries to increase market share among existing customers ex) Present Product & Present Market Starbucks sells more coffee to customers who register their reloadable Starbucks cards.

competitive advantage 경쟁 우위

a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition There are three types of competitive advantage: cost, product/service differentiation, and niche.

mission statement

a statement of the firm's business based on a careful analysis of benefits sought by present and potential customers and an analysis of existing and anticipated environmental conditions The firm's mission statement establishes boundaries for all subsequent decisions, objectives, and strategies.

marketing objective

a statement of what is to be accomplished through marketing activities

Diversification

a strategy of increasing sales by introducing new products into new markets ex) New Product & New Market Starbucks launches Hear Music and buys Ethos Water.

strategic business units (SBUs)

a subgroup of a single business or collection of related businesses within the larger organization

marketing audit

a thorough, systematic, periodic evaluation of the objectives, strategies, structure, and performance of the marketing organization A marketing audit helps management allocate marketing resources efficiently. the main purpose of the marketing audit is to develop a full profile of the organization's marketing effort and to provide a basis for developing and revising the marketing plan, it is also an excellent way to improve communication and raise the level of marketing consciousness within the organization.

portfolio matrix

a tool for allocating resources among products or strategic business units on the basis of relative market share (시장 점유율) and market growth rate

four Ps

a unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market

marketing mix

a unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market

marketing plan

a written document that acts as a guidebook of marketing activities for the marketing manager

Sustainable Competitive Advantage

an advantage that cannot be copied by the competition The sources of tomorrow's competitive advantages are the skills and assets of the organization. Assets include patents, copyrights, locations, equipment, and technology that are superior to those of the competition

Cost Competitive Advantage

being the low-cost competitor in an industry while maintaining satisfactory profit margins Experience curves Efficient labor No-frills goods and services Government subsidies Product design Reengineering Production innovations New methods of service delivery

marketing myopia

defining a business in terms of goods and services rather than in terms of the benefits customers seek myopia means narrow, short-term thinking.

environmental scanning

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 It helps identify market opportunities and threats and provides guidelines for the design of marketing strategy.

Experience curves

curves that show costs declining at a predictable rate as experience with a product increases

Marketing Plan Elements

elements include 1. defining the business mission 2. performing a situation analysis 3. defining objectives 4. delineating a target market 5. establishing components of the marketing mix Other elements that may be included in a plan are budgets, implementation timetables, required marketing research efforts, or elements of advanced strategic planning.

Evaluation

gauging the extent to which the marketing objectives have been achieved during the specified time period

When examining external opportunities and threats

marketing managers must analyze aspects of the marketing environment. This process is called environmental scanning

Control

provides the mechanisms for evaluating marketing results in light of the plan's objectives and for correcting actions that do not help the organization reach those objectives within budget guidelines

Niche Competitive Advantage

the advantage achieved when a firm seeks to target and effectively serve a small segment of the market Small companies with limited resources that potentially face giant competitors, niche targeting may be the only viable option. niche strategy serve only a limited geographic market

market opportunity analysis (MOA)

the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments

When examining internal strengths and weaknesses

the marketing manager should focus on organizational resources such as production costs, marketing skills, financial resources, company or brand image, employee capabilities, and available technology.

Planning

the process of anticipating future events and determining strategies to achieve organizational objectives in the future.

Implementation

the process that turns a marketing plan into action assignments and ensures that these assignments are executed in a way that accomplishes the plan's objectives Implementation activities may involve detailed job assignments, activity descriptions, time lines, budgets, and lots of communication.

product/service differentiation competitive advantage

the provision of something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition ex) Gym with Crossfit strength and conditioning program