Marketing Management Chapter 2

Mission Statement

- a statement of the organization's purpose - what it wants to accomplish in the larger environment - reason for existence and defines the unique purpose that sets it apart from competitors scope of the company's operations, products, and markets. Most mission statements also include a discussion of what the company would like to become in the future - its strategic vision.

political, legal and ethical

- macro-external -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.

Boston Consulting Group Matrix (BCG)

-Classification of a firm's products into a two-by-two matrix that looks at market share and market growth rate -The concept of the BCG approach to portfolio analysis is to position each SBU within a firm on the two-dimensional matrix shown in Exhibit 2.3. 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 attrac- tiveness. Within the BCG matrix you find four cells, each representing strategy recommendations:

Internal environmental factors

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

substitute goods

-Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises. -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?

Power of Buyers

-The advantage buyers have when they have leverage over suppliers and can demand deep discounts and special services. -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.

socio-culture/demographic

-macro -. 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.38 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.

distinctive competence

-what a company can make, do, or perform better than its competitors - firms should invest in this concept considering it offers firms a sustainable competitive advantage

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.

firm resources

Finally, 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. Key resources for study are: • Marketing capabilities. • Financial capabilities. • R&D and technological capabilities. • Operations and production capabilities. • Human capabilities. • Information system capabilities.

SBU (strategic business unit)

In business, a strategic business unit (SBU) is a profit center which focuses on product offering and market segment. SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity.

Threat of Entrants

New entrants can shake up an industry and cause increased competition as they seek to take market share from existing companies in the industry. New Airline

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.

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.

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.

niche strategy

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.

core competencies

Things a company does extremely well, which sometimes give it an advantage over its competition

Firm 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.

Rilvalry

_ among existing competitors is high when competition is fierce in a market and low when competitors are more complacent. -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.

product development strategy

a growth strategy that offers a new product or service to a firm's current target market

diversification strategy

a growth strategy whereby a firm introduces a new product or service to a market segment that it does not currently serve

SWOT analysis

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

Power of Suppliers

if there are only a few suppliers of important items, supply costs rise

Penetration Strategies

intended to courage current customers to buy more of a firm's existing products

Profile Analysis

views SBUs and sometimes even product lines as a series of investments from which it expects maximization of returns

What are the elements of the BCG?

• Stars (high share, high growth): important to building the future of the business and deserving any needed investment. • Cash Cows (high share, low growth): key sources of internal cash generation for the firm. • Dogs (low share, low growth): potential high cash users and prime candidates for liquidation. • Problem Children, or Question Marks (low share, high growth): high cash needs that, if properly nurtured, can convert into stars. 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.

market development strategy

employs the existing products and marketing offering to reach new market segments, whether domestic or international

cost leadership strategy

generic business strategy that seeks to create the same or similar value for customers at a lower cost

Porter's Five Forces

1. Potential entrants 2. Power of buyers 3. Power of suppliers 4. Substitutes 5. Rivalry

what are the 3 primary categories of competitive strategy?

1. cost leadership (low cost) 2. differentiation 3. niche or focus

implementation plan

1. forecasts 2. budgets 3. marketing control- a. Process of measuring marketing results and adjusting the marketing plan as needed 4. action plans- Implementation strategy that describes specific tasks and the resources needed, who is responsible, and metrics to track success 5. 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.

What are types of situational analysis

1. macro-external 2. competitive environment 3. internal factors

situation analysis for a project

1. market description- major segments and then reviews customer need/want and factors that affect customer purchasing 2. product review- the product's major attributes, and details about the different sizes, prices etc. a. The typical rate of use/ repurchasing for the product category b. Forms/prices in which you offer the product 3. competitive review- access major competitors market positions , their strategies for product quality, pricing, distribution and promotion. a. The reader should be able to see how your company matches up with the offerings of the competition.

Marketing Strategies

1. market penetration strategies 2. product development 3. market development 4. diversification

macro (external) environment

1. political, legal and ethical 2. socio-cultural/demographic 3. technological 4. economic 5. natural

Generic Strategy

A general way of positioning a firm's business-level strategy within an industry. firm's 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. Exhibit 2.5 provides options for generic strategies for each of these three directions. 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.

An example of profile analysis-GE

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. CEO Jeff Immelt oversees a corporate-level strategic plan to serve as an umbrella plan for the overall direction of the corpo- ration, but the real action in marketing planning at GE is at the individual SBU level. 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.

GE Business Screen

A popular approach for in-firm portfolio analysis that categorizes business units' level of contribution to the overall firm based on two factors: business position and market attractiveness. - The GE Business Screen, shown in Exhibit 2.4, 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

differentiation strategy

A strategy an organization uses to build competitive advantage by being unique in its industry or market segment along one or more dimensions. people are willing to pay a premium for

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.

strategy

a plan of action or policy designed to achieve a major or overall aim. - a strategy is a comprehensive plan stating how the org. will achieve its mission and objectives - a firms generic strategy is its overall directional level at the business level. - Growth - stability - retrenchment - Strategy 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.