MKTG 480: Chapter 3 - Elements of Marketing Strategy and Planning

Internal Environmental Factors

- Firm structure and systems - firm culture - firm leadership - firm resources

Support activities in value creating

1. firm infrastructure 2. Human resource management 3. technology development 4. procurement

Distinctive Competencies

Core Competencies that are superior to competitors

SBU-level strategic plan

Each GE Business has its own SBU level strategic plan and part of GE's historical leadership culture has been to turn SBU management loose to run their own businesses under their own plans, so long as they meet their performance requirements and contribute satisfactorily to the overall corporate plan

Rivalry among existing firms

How much direct competition is there? - How much indirect competition? - How strong are the firms in both categories? - JetBlue's industry contains a number of firms that are much larger, but based on JetBlue's unique value proposition few of them can deliver the same customer experience that JetBlue can.

Threat of new entrants

How strong are entry barriers based on capital requirements or other factors? - A cornerstone of JetBlue's initial market entry success was the fact that it was exceptionally well-capitalized. - Not many new airlines are.

Service

How the firm supports customers during and after the sale.

Action Plans:

Implementation strategy that describes specific tasks and the resources needed, who is responsible and metrics to track success

Stay strategic, but also stay on top of the tactical

Remember that marketing has these two levels of interrelated issues, and both the strategic and tactical elements have to be right for the plan to be successful

Bargaining power of suppliers

Suppliers impact the competitive nature of an industry through their ability to raise prices or affect the quality of inbound goods and services. - Jet fuel literally fires the airline industry's economic engine. Also, few manufacturers of commercial aircraft still exist. - Both of these factors point to a competitive environment with strong supplier power.

Focus (or Niche)

The organization pursues either a cost or differentiation advantage, but in a limited (narrow) customer group. A focus strategy concentrates on serving a specific market niche.

Cost Leadership

The organization strives to have the lowest costs in its industry and produces goods or services for a broad customer base. Note the emphasis on costs not prices.

Marketing control

The process of measuring marketing results and adjusting the marketing plan as needed

Stability

The strategy to continue current activities with little significant change in direction may be appropriate for a successful organization operating in a reasonably predictable environment. - useful short-term strategy - dangerous in the long-run if competition changes, especially if the competitive landscape changes

Don't underestimate the implementation part of the plan

This is such a common mistake it is nearly synonymous with poor marketing planning. The quality of the action plans and metrics often make or break the success of the plan. - Put another way, a good plan on paper is useless without effective implementation.

Bargaining power of buyers

To what degree can customers affect prices or product offerings? - So far, JetBlue has not been in much head-to-head competition with Southwest, AirTran Airways, Frontier Airlines, or other low- fare carriers in its primary markets. - Should this change, passengers will have more power to demand even lower fares and/or additional services from JetBlue.

Firms structure and systems

To what degree does the present organizational structure facilitate or impede successful market-driven strategic planning? - Are the firm's internal systems set up and properly aligned to effectively serve customers? - David Neeleman had his organizational chart right on the company Web site and talked openly about being a lean and mean operation. - It's hard to find much evidence that JetBlue's structure and systems offer impediments to its marketing planning.

Market development strategies

allow for expansion of the firm's product line into heretofore untapped markets, often internationally. - introduce existing products to new markets

Mission Statement

articulates an organization's purpose, or reason for existence - most mission statements also include a discussion of what the company would like to become in the future - its strategic vision - marketing planning does not occur in a vacuum

Goals

eventually become refined into specific, measurable and (hopefully) attainable objectives for the firm - Jet Blue's goals "to fly new planes" may be refined into an objective "to purchase 15 new aircraft over two years" - need to make sure you company is moving in the right direction by setting good goals - time specific, measurable, realistic

Problem Children or Question Marks

high cash needs that, if properly nurtured, can convert into stars.

Marketing and Sales

how the firm communicates the value proposition to the marketplace.

Technology development

how the firm embraces technology usage for the benefit of customers.

Human Resource management

how the firm ensures it has the right people in place, trains them, and keeps them.

Inbound logistics

how the firm goes about sourcing raw materials for production.

Outbound logistics

how the firm transports and distributes the final products to the marketplace.

Stars

important to building the future of the business and deserving any needed investment.

Firms resources

internal analysis involves taking an honest look at all aspects of a firm's functional/operational-level resources and capabilities and how they play into the ability to develop and execute market-driven strategies.

Strategy

is a comprehensive plan stating how the organization will achieve its mission and objectives - is like a road map to get the organization where it wants to go, based on good information gathered in advance. - The choice of which direction a firm should go ultimately boils down to a decision by a firm and its managers. - Strategy has two key phases: formulation (or development) and execution. - And it occurs at multiple levels in the firm: corporate level, SBU (or business) level, and functional level (marketing, finance, operations, etc.). - As we have discussed, the strategies developed and executed at each of these levels must be aligned and directed toward the overall organizational mission and goals.

Value

is a ratio of benefits to costs, as viewed from the eyes of the beholder (the customer)

Form utility

is created when the firm converts raw materials into finished products that are desired by the market.

Generic strategy

is its overall directional strategy at the business level. - Fundamentally, all firms must decide whether they wish to (or are able to) grow, and if not, how they can survive through stability or retrenchment. - The choice of generic strategy is usually driven by resource capabilities of the firm, as well as the competitive landscape. - In the growth-oriented business culture in the United States, stockholders and financial analysts are constantly interested in knowing a firm's next growth strategy and can become quickly disenchanted, even with firms that are growing but at a slower than predicted rate. - Yet, sometimes for reasons related to the competitive landscape or resource constraints, the best generic strategy for a firm may not actually be growth but be stability or retrenchment instead. - Interestingly, the pressure to constantly achieve accelerated growth is much less intense in many business cultures outside the United States

Market-driven strategic planning

is often used to describe the process at the corporate or strategic business unit (SBU) level of marshaling the various resource and functional areas of the firm toward a central purpose around the customer.

Product development strategies

recognize the opportunity to invest in new products that will increase usage from the current customer base. - create growth by selling new products in existing markets

Diversification strategies

seize on opportunities to serve new markets with new products - Emphasize both new products and new markets to achieve growth

Marketing plan

the resulting document that records the marketing planning process in a useful framework

Corporate-level Strategic plan

to serve as an umbrella plan for the overall direction of the corporation, but the real action in marketing planning at GE is at the individual SBU level.

Market penetration strategies

involve investing in existing customers to gain additional usage of existing products. - seek to increase sales of existing products to existing markets

Benefit

is some type of utility that a company and its products (and services) provide its customers.

Value proposition

is the firm's communication of the unique value of its products to its customers - the value message may include the whole bundle of benefits the company promises to deliver - not just the benefits of the product itself - a firms value proposition must be strong enough to move customers past satisfaction - A firm's value proposition must be strong enough to move customers past mere satisfaction and into a commitment to a company and its products and brands for the long run. - Such a commitment reflects a high level of customer loyalty, which increases customer retention and reduces customer switching.

Marketing planning

is the ongoing process of developing and implementing market-driven strategies for an organization.

Utilize input, but don't become paralyzed by information and analysis

Great marketing managers value research and analytics, but also know when to move forward with action.

Portfolio Analysis

views SBUs and sometimes even product lines as a series of investments from which it expects maximization of returns 1. Boston consulting group (BCG) Growth share matrix 2. GE Business Screen - A great example of how these levels of planning fit together is General Electric. GE contains numerous SBUs that compete in very different markets, from lighting to jet engines to financial services.

Core competencies

Activities the firm does well - porter's overarching premise is that firms must first identify this

Additional Aspects

Additional aspects of marketing planning - develop marketing strategies 1. Market penetration strategies 2. Product Development Strategies 3. Market development strategies 4. Diversification strategies

SWOT Analysis Template

- Internal Factors; (Horizontal) 1. Strengths (S) 2. Weaknesses (W) - External Factors: (Vertical) 1. Opportunities (O) 2. Threats (T) - S/O base strategies - generate strategies here that use strengths to take advantage of opportunities - W/O Based strategies - generate strategies here that take advantage of opportunities by overcoming weaknesses - S/T based strategies - Generate strategies here that use strengths to avoid threats - W/T based strategies - generate strategies here that minimize weaknesses and avoid threats - Besides helping a marketing manager organize the results of a situation analysis, the SWOT analysis template is also useful in beginning to brainstorm marketing strategies that might be appropriate depending on which of four possible combination scenarios predominate in a firm's situation: internal strengths/external opportunities, internal strengths/external threats, internal weaknesses/external opportunities, or internal weaknesses/external threats. - During the situation analysis it is essential to begin to critically and realistically examine the degree to which a firm's external and internal environment will impact its ability to develop marketing strategy.

Competitive Environmental Factors

- Threat of new entrants - Rivalry among existing firms - threat of substitute products - bargaining power of buyers - bargaining power of supplies

Framework for marketing planning

- marketing planning is connected to the firm's business plan: including organizational- level mission, vision, goals, objectives, and strategies. - conduct a situation analysis 1. Macro-level external environment 2. Competitive environment 3. Internal environment - perform any needed market research - establish marketing goals and objectives - develop marketing strategies 1. Product-market combinations 2. Market segmentation, target marketing, positioning - marketing mix strategies - develop implementation plans - provide for contingency planning

Macro-Level External Environment

- political, legal and ethical - Sociocultural / Demographic - Technological - Economic - Natural

Forces Driving Industry Competition

- supplier (supplier power) - Buyers (buyer power) - Substitutes (threat of substitutes) - Potential entrants (threat of mobility) Industry competitors (segment rivalry)

Primary activities in Value creating

1. inbound logistics 2. operations 3. outbound logistics 4. marketing and sales 5. service

Elements of Marketing Panning: Competencies

1. Core competencies 2. Distinctive Competencies 3. Sustainable competitive advantage

Three primary categories of competitive strategy:

1. Cost leadership - low cost 2. Differentiation 3. Focus (or niche)

Implementation Plan

1. Forecast 2. Budget 3. Appropriate Marketing Metrics - strategy development is only part of marketing planning - the other part is strategy implementation, including measuring results - In a marketing plan, every strategy must include an implementation element. - Sometimes these are called action plans or programs. Each must discuss timing, assign persons responsible for various aspects of implementation, and assign resources necessary to make the strategy happen. - Forecasts and their accompanying budgets must be provided. - Then, appropriate metrics must be identified to assess along the way to what degree the plan is on track and the strategies are contributing to achievement of the stated marketing objectives

The four major types of utility are:

1. Form utility 2. Time utility 3. Place utility 4. Ownership utility

Generic business strategies

1. Growth 2. Stability 2. Retrenchment 4. diversification 5. concentration

Tips fo successful marketing planning

1. Stay Flexible 2. Utilize input, but don't become paralyzed by information and analysis 3. Don't underestimate the implementation part of the plan 4. Stay strategic, but also stay on top of the tactical 5. Give yourself and your people room to fail and try again

Effective marketing planning must be customer centric

1. everyone in an organization must understand and support the concept of customer orientation, which places the customer at the core of all aspects of the enterprise. -Firms who promote and practice a high level of customer focus are often referred to as customer-centric organizations. 2. all internal organizational processes and systems must be aligned around the customer - A firm's internal structure and systems cannot be allowed to become an impediment to a customer orientation. - Anyone who has ever placed a phone call for service and been driven through a maze of phone transfers with a string of people (or machines) unable to help knows how poor structure and systems can impact customer satisfaction and loyalty! 3. the C-suite sets the tone - The CEO and others at the top of the organization must consistently set the tone for market-driven strategic planning through the customer-centric business philosophy. - As with a firm's internal structure and systems, its culture must be supportive of such an approach in order for a marketing plan to be successful. - Upper management must also support the process through consistent investment of resources necessary to make it work.

Political, legal and ethical

All firms operate within certain rules, laws, and norms of operating behavior. - For example, JetBlue has myriad regulations administered by the Federal Aviation Administration, the National Transportation Safety Board, and the Transportation Security Administration. - In the airline industry, the regulatory environment is a particularly strong external influence on firms' marketing planning.

Customer loyalty

Almost always is directly related to the various sources of value the customer is presently deriving from the relationship with the company and its brands. - Except in situations of monopoly (which creates forced loyalty), loyal customers by definition tend to also experience a high level of satisfaction. - However, not all satisfied customers are loyal. - If a competitor comes along with a better value proposition, or if a value proposition begins to slip or is not effectively communicated, customers who are presently satisfied become good candidates for switching to another company's products.

Retrenchment

An organization in a weak competitive position in some or all of its product lines, resulting in poor performance and pressure on management to quickly improve, may pursue retrenchment. - Essentially, retrenchment involves pulling assets out of underperforming parts of the business and reinvesting in aspects of the business with greater future performance potential.

Time, place and ownership utility

Are created by marketing. - They are created when products are available to customers at a convenient location when they want to purchase them, and facilities of exchange are available that allow for transfer of the product ownership from seller to buyer.

Firm culture

As discussed previously, successful marketing planning requires a culture that includes customer orientation as a core value. - If a firm's culture does not value and support a customer orientation and customer-centric approach to the overall business, marketing planning will likely disappoint. - A close review of the communication with customers on JetBlue's Web site provides evidence that customer orientation is a core value at the company

Competitive Strategy Options

Competitive scope - vertically - broad target - narrow target competitive advantage - horizontal - lower cost - differentiation 1. Broad Target / lower cost - cost leadership 2. Broad Target / differentiation - differentiation 3. Narrow target /lower cost - cost focus 4. Narrow target / differentiation - focus differentiation

Technological

Constantly emerging and evolving technologies impact business in many ways. - The goal is to try to understand the future impact of technological change so a firm's products will continue to be fresh and viable. - JetBlue ordered a number of new downsized "regional jets," planes that carry about 50 passengers and allow for entry into smaller, underserved markets. - The airline is banking on these attractive, comfortable new aircraft to provide a market edge over the competition.

Stay Flexible

Don't forget that marketing plans are not set in stone. - Markets and customers change, competitors do unexpected things, and the external environment has a nasty habit of creating unexpected surprises. - Great marketing managers understand when to adjust a plan. - Nimble organizations tend to be much more successful in their marketing strategies. - Marketing plans are not written in stone— that is, after a plan is prepared myriad changes in the firm's external and internal environment may create a need for marketing managers to quickly alter their strategies in the marketplace. - The more nimble a company is in changing course to address new conditions as they arise, the more successful its marketing strategies will be.

prospectors

Firm exhibits continual innovation by finding and exploiting new product and market opportunities.

Analyzer

Firm heavily relies on analysis and imitation of the successes of other organizations, especially prospectors.

Reactor

Firm lacks any coherent strategic plan or apparent means of effectively competing; reactors do well to merely survive in the competitive marketplace.

Defender

Firm searches for market stability and production of only a limited product line directed at a narrow market segment, focusing on protecting established turf.

GE business Screen

Is a more realistic and complex portfolio model. - It also evaluates the business on two dimensions—market attractiveness and business position, which refers to its ability to compete. - The investment decision is again suggested by the position on a matrix. - A business that is favorable on both dimensions should usually be a candidate to grow. - When both market attractiveness and business position evaluations are unfavorable, the harvest or divest options should be raised. - When the matrix position is neither unambiguously

Give yourself and your people room to fail and try again

Marketing planning is by no means a predictable science. - It is more realistic to think of it as both science and art, and creativity and risk-taking are to be rewarded. - All great marketing managers have experienced both success and failures in marketing planning. - As in baseball, it's not one or two times at bat but rather the long- term batting average that separates the great from the average performer

Product - Market Combinations

Markt Emphasis: (Vertical) - Existing Markets - new markets Product Emphasis: (Horizontal) - existing products - new products 1. Existing markets / existing products - market penetration 2. Existing Markets / new products - product development 3. New markets / existing products - market development 4. new markets / new products - diversification

Competitive Strategy

Michael Porter identifies three primary categories of competitive strategy: low cost, differentiation, and focus (or niche).

Firm leadership

Of course, the CEO must believe in and continuously sup- port (financially and otherwise) the structure, systems, and culture necessary for market-driven strategic planning. - JetBlue's employee-friendly—and customer-friendly—approach epitomizes such leadership and commitment.

Growth

Organizations that do business in dynamic competitive environments generally experience pressure to grow in order to survive. - Growth may be in the form of sales, market share, assets, profits, or some combination of these and other factors. - Categories of growth strategies include: 1. concentration - via vertical or horizontal integration 2. diversification - via concentric or conglomerate means

market reserach

Perform any needed market research - establish marketing goals and objectives - goals are qualitative - objectives are quantitative

Contingency plans

Plans that can be implemented should something happen that negates the viability of the marketing plan - Contingency plans are often described in terms of a separate plan for a worst-case, best-case, and expected-case performance against the forecast. - That is, the implementation of the marketing strategies would be different depending on how performance against the forecast actually materializes. - If better, the firm could quickly shift to a best-case implementation scenario. If worse, then the shift would be to a worst-case scenario. - Having these contingency plans in place avoids scrambling to decide how to adjust marketing strategies when performance against a forecast is higher or lower than expected.

Porter's value chain

Porter's nine value-creating activities include five primary activities and four support activities. 1. Support activities: - firms infrastructure - human resource management - technology development - procurement 2. Primary activities - inbound logistics - operations - outbound logistics - marketing and sales - service You get your margin from this - Basically, the value chain concept holds that every organization represents a synthesis of activities involved in designing, producing, marketing, delivering, and supporting its products. - The value chain identifies nine relevant strategic activities the organization can engage in that create/impact both sides of the value equation: benefits and costs. - Porter's nine value-creating activities include five primary activities and four support activities.

Miles and Snow's Strategy Types

Strategic Types: 1. prospectors 2. reactors 3. defenders 4. analyzers

Threat of substitute products

Substitutes appear to be different but actually can satisfy much or all of the same customer need as another product. - Will teleconferencing PC-to-PC (using products such as Skype) reach a point in the near future such that business travel is seriously threatened, thus impacting JetBlue and other airlines?

SWOT Analysis

Summaries the situation analysis into a SWOT analysis: - A convenient way to summarize key findings into a matrix of strengths, weaknesses, opportunities and threats - internal analysis reveals strengths and weaknesses, while external analysis points to potential opportunities and threats

Economic

The economy plays a role in all marketing planning. - Part of a marketing plan is a forecast and accompanying budget, and forecasts are impacted by the degree to which predicted economic conditions actually materialize. - Fuel prices are a major economic cost element for any airline. - JetBlue was a pioneer in hedging against rising fuel prices—that is, making speculative long- term purchase commitments betting on fuel prices going up.

Natural

The natural environment also frequently affects marketing planning. - JetBlue's highly publicized winter weather fiasco at JFK airport in 2007 prompted immediate changes in the way the company communicates with its customers. - And on a broader scope, the concept of environmentally friendly marketing, or green marketing, has been a growing trend in socially responsible companies. - Sustainability, which refers to business practices that meet humanity's needs without harming future generations, has evolved into a part of the philosophical and strategic core of many firms.

Differntiation

The organization competes on the basis of providing unique goods or services with features that customers value, perceive as different, and for which they are willing to pay a premium.

Sociocultural/demographic

Trends among consumers and in society as a whole impact marketing planning greatly. - Many such trends are demographic in nature, including changing generational preferences and the rising buying power of minority groups domestically and consumers in developing nations in the global marketplace. - Speaking of generational preferences, JetBlue jumped on the video game trend among children and teens by providing in- seat games, much to the delight of parents who no longer have to entertain the kids for the duration of the flight.

Sustainable competitive advantage

cannot be easily duplicated by competitors or usurped by competitors. - firms should invest in distinctive competencies as they offer this opportunity

Boston Consulting Group Growth-Share Matrix

concept is to position each SBU within a firm on the two-dimensional matrix - The competitive market-share dimension is the ratio of share to that of the largest competitor. - The growth dimension is intended as a strong indicator of overall market attractiveness. Within the BCG matrix you find four cells, each representing strategy recommendations: 1. Stars (high share, high growth) 2. Cash Cows (high share, low growth) 3. Dogs (low share, low growth) 4. Problem children (low share, high growth) - For purposes of strategy development, the BCG matrix approach is seductively simple and has contributed to decision making about internal cash generation and usage across SBUs. - It has also morphed in application downward to often be applied to product lines and product groups, which is nominally possible so long as costs and returns can be properly isolated for investment decisions. - But by nature of simplicity, BCG ignores other important factors that should go into this decision making and also ignores the viability of generating cash externally.

Opreations

how the firm converts the raw materials into final products.

Procurement

how the firm deals with vendors and quality issues.

Firm infrastructure

how the firm is set up for doing business; are the internal processes aligned and efficient.

Utility

is the want-satisfying power of a good or service. Four major kinds of utility exist: form, time, place, and ownership

Cash Cows

key sources of internal cash generation for the firm. ex. Apple (Iphone)

Dogs

potential high cash users and prime candidates for liquidation. ex. Dairy Milk

marketing (little m)

represents the specific programs and tactics aimed at customers and other stakeholder groups. - includes everything from brand image, to the message salespeople and advertisements deliver, to customer service, to packaging and product features—in fact, all elements of operationalizing the marketing mix and beyond. - at the functional or operational level

Marketing (Big M)

serves as a core driver of business strategy - That is, an understanding of markets, competitors, and other external forces, coupled with attention to internal capabilities, allows a firm to successfully develop strategies for the future.

Value chain

serves as a means for firms to identify ways to create, communicate, and deliver more customer value within a firm - concept holds that every organization represents a synthesis of activities involved in designing, producing, marketing, delivering, and supporting its products. - The value chain identifies nine relevant strategic activities the organization can engage in that create/impact both sides of the value equation: benefits and costs