Chapter 2

Opportunities and threats affect all organizations within an industry, market, or geographic region because they exist outside of and independently of the company.

(1) Opportunities refer to favorable conditions in the environment that could produce rewards for the organization if acted upon. (2) Threats refer to barriers that could prevent the organization from reaching its objectives.

Weaknesses

(internal) limitations a company faces in developing or implementing a marketing strategy.

strategic planning process begins

with an analysis of the marketing environment, which can influence an organization's goals, resources, and opportunities.

Competitive advantage

A company is said to have a competitive advantage when it matches a core competency to opportunities it has discovered in the marketplace.

Strategic planning must assess an organization's available financial and human resources and capabilities and how these resources are likely to change over time. Resources can include:

a. Customer satisfaction and loyalty b. Goodwill c. Reputation d. Brand names e. Core competencies, things a firm does extremely well—sometimes so well that they can give the company an advantage over its competition.

Establishing an implementation timetable involves several steps:

a. Identifying the activities to be performed b. Determining the time required to complete each activity c. Separating the activities to be performed in sequence from those to be performed simultaneously d. Organizing the activities in the proper order e. Assigning responsibility for completing each activity to one or more employees, teams, or managers

Selecting the Target Market

a. Selecting an appropriate target market may be the most important decision a company makes in the strategic planning process and is crucial for strategic success. b. The target market must be chosen before the organization can adapt its marketing mix to meet the customers' needs and preferences. c. When exploring possible target markets, marketing managers try to evaluate how entry could affect the company's sales, costs, and profits. d. Marketers should determine whether a selected target market aligns with the company's overall mission and objectives. e. Marketers should also assess whether the company has the resources to develop the right marketing mix to meet the needs of a particular target market. The size and number of competitors is also a concern.

Creating Marketing Mixes

a. The decisions made in creating a marketing mix are only as good as the organization's understandings of the target market. b. Understanding comes from careful in-depth research into demographics as well as customer needs, preferences, and behavior with respect to product design, pricing, distribution, and promotion. c. Marketing mix decisions should be consistent with the business-unit and corporate strategies as well as flexible enough to permit the organization to alter the marketing mix in response to changes in marketing conditions, competition, and customer needs. d. Utilizing the marketing mix as a tool set, a company can detail how it will achieve a sustainable competitive advantage. e. A sustainable competitive advantage is one that the competition cannot copy in the foreseeable future.

Late-mover advantage

ability of later market entrants to achieve longterm competitive advantages by not being the first to offer a certain product in a marketplace. (1) Benefits include learning from first-mover's mistakes, improved products and marketing strategies, lower initial investment costs, more market certainty, and more educated buyers. (2) Risks include first-movers holding patents and other protections on products and difficulty in convincing consumers to change brands. (3) The timing of entry to the market is crucial and can determine the amount of late-mover advantage.

Establishing Performance Standards

1. A performance standard is an expected level of performance against which actual performance can be compared, such as a reduction in customer complaints, a sales quota, or an increase in new-customer accounts. 2. Marketing objectives directly or indirectly set forth performance standards, usually in terms of sales, costs, or communication dimensions.

Comparing Actual Performance with Performance Standards and Making Changes, If Needed

1. Comparing actual performance with established performance standards can result in actual performance exceeding performance standards or actual performance failing to meet performance standards. 2. It is important to find out why a particular strategy is effective or ineffective so that it can be improved. 3. Marketers may have to alter the marketing objective to make it more realistic.

The major components of a marketing plan include:

1. The executive summary, a one- to two-page synopsis of the entire marketing plan. 2. The environmental analysis, which provides information about the company's current situation with respect to the marketing environment, the target market, and the firm's current objectives and performance. 3. The SWOT analysis, which assesses the organization's strengths, weaknesses, opportunities, and threats. 4. The marketing objectives, a specification of the company's marketing objectives that includes qualitative and quantitative measures of what is to be accomplished. 5. The marketing strategies, which outlines how the company will achieve its objectives (identifies the target market(s) and marketing mix). 6. The marketing implementation section, which outlines how the company will implement its marketing strategies. The performance evaluation section, which explains how the company will evaluate the performance of the implemented plan (includes performance standards, financial controls, and monitoring procedures).

marketing plan

The strategic planning process ultimately yields a marketing strategy that is the framework for a marketing plan, a written document that specifies the marketing activities to be performed to implement and evaluate the organization's marketing strategies.

The Strategic Planning Process

With competition increasing, firms must spend more time planning—determining how to use resources and capabilities to achieve objectives and satisfy customers

Corporate strategy definition

determines the means for utilizing resources in the functional areas of marketing, production, finance, research and development (R&D), and human resources to achieve the organization's goals.

Strategic marketing management

the process of planning, implementing, and evaluating the performance of marketing activities and strategies, both effectiveness and efficiency. The overall goal of strategic marketing management is to facilitate desirable customer relationships and reduce costs.

Marketing implementation

the process of putting marketing strategies into action.

Strategic business unit (SBU)

a division, product line, or other profit center within the parent company. Strategic planners should recognize the performance capabilities of each SBU and carefully allocate resources among the divisions.

Organization's products into four basic types

(a) Stars have a dominant share of the market and good prospects for growth; they use more cash than they generate to finance growth, add capacity, and increase market share. (b) Cash cows have a dominant share of the market but low prospects for growth; they typically generate more cash than is required to maintain market share. (c) Dogs have a subordinate share of the market and low prospects for growth; these products are often found in established markets. (d) Question marks, sometimes called "problem children," have a small share of a growing market and generally require a large amount of cash to build market share.

Creating the Marketing Plan

1. It provides a uniform marketing vision for the firm and is the basis for internal communication among employees. 2. It delineates marketing responsibilities and tasks and outlines schedules for implementation. 3. It presents objectives and specifies how resources are to be allocated to achieve these objectives. 4. It helps marketing managers monitor and evaluate the performance of a marketing strategy. 5. A company may develop multiple marketing plans, with each relating to a specific brand or product. 6. Organizations use many different formats, and it is important is to make sure that it aligns with corporate and business-unit strategies and is shared with all key employees. 7. Marketing planning and implementation are closely linked in successful companies. a. The marketing plan provides a framework to stimulate thinking and provide strategic direction. b. Implementation is an adaptive response to day-to-day issues, opportunities, and unanticipated situations that cannot be incorporated into marketing plans.

Motivating Marketing Personnel

1. Managers must address their employees' needs and then develop motivational methods that will help employees satisfy those needs. 2. Employee rewards should be tied to organizational goals. 3. A firm can motivate its workers by directly linking pay with performance, informing workers how their performance affects department and corporate results, following through with appropriate and competitive compensation, implementing a flexible benefits program, and adopting a participative management approach. 4. Managers should also use a variety of other tools, including nonfinancial rewards such as prestige or recognition, job autonomy, skill variety, task significance, increased feedback, or even a more relaxed dress code.

Marketing Cost Analysis

1. Marketing cost analysis breaks down and classifies costs to determine which are associated with specific marketing efforts. 2. By pinpointing exactly where a company incurs costs, this form of analysis can help isolate profitable or unprofitable customers, products, and geographic areas. 3. A company that understands and manages its costs appropriately has a competitive advantage and can compete on price. 4. One way to analyze costs is by comparing a company's costs with industry averages; however, a company should take into account its own unique situation. 5. Costs can be categorized into fixed costs (always the same over time) such as rent as well as variable costs (affected by sales or production volume) such as the cost to produce product. They can also be categorized by whether they can be linked to a specific business function.

Communicating within the Marketing Unit

1. Marketing managers must be in clear communication with the firm's upper-level management to ensure that they are aware of the firm's goals and achievements and that marketing activities are consistent with the company's overall goals. 2. Communication that flows upward from the front lines of the organization to higher-level marketing managers provides important information about the needs of customers and employees. 3. Training provides employees with a forum to learn and ask questions, and results in employees who are empowered and can be held accountable for their performance. 4. Information systems expedite communications within and between departments and support other activities, such as allocating scarce organizational resources, planning, budgeting, sales analyses, performance evaluations, and report preparation.

Sales analysis

1. Sales analysis uses sales figures to evaluate a firm's current performance. 2. A common method of evaluation because sales data are readily available and can reflect the target market's reactions to a marketing mix. 3. To be useful, marketers must compare current sales data with forecasted sales, industry sales, specific competitors' sales, and the cost incurred from marketing efforts to achieve the sales volume. 4. The basic unit of measurement is the sales transaction, which includes the quantity, terms, the salesperson or sales team, and the date. 5. Firms frequently use dollar volume in their sales analysis because the dollar is a common denominator of sales, costs, and profits. 6. A marketing manager who uses dollar-volume analysis should factor out the effects of price changes, which can skew the numbers by making it seem that more or fewer sales have been made than is the actual case. 7. Market share analysis lets a company compare its marketing strategy with competitor's strategies and estimate whether sales changes have resulted from the firm's marketing strategy or from uncontrollable environmental forces. However, the results must be interpreted carefully.

Analyzing Actual Performance

1. The principle means by which a marketer can gauge whether a marketing strategy has been effective in achieving objectives is by analyzing the actual performance of the marketing strategy. 2. Technology advancements have made it easier for firms to analyze actual performance.

Strategic planning process

1. The process begins with the establishment or revision of an organization's mission and goals. 2. The corporation and individual business units then develop strategies to achieve these goals. 3. The company then analyzes its strengths and weaknesses and identifies opportunities and threats within the external marketing environment. 4. Each functional area of the organization establishes its own objectives and develops strategies to achieve them, which must support the organization's overall goals and mission and should be focused on market orientation.

Organizing the Marketing Unit

1. The structure and relationships of a marketing unit, including establishing lines of authority and communication that connect and coordinate individuals, strongly affect marketing activities. 2. Companies that truly adopt the marketing concept develop an organizational culture that is based on a shared set of beliefs that places the customer's needs at the center of decisions about strategy and operations. 3. Firms must decide whether operations should be centralized or decentralized, a choice that directly impacts marketing decision making and strategy. a. In a centralized organization, top-level managers delegate little authority to lower levels. Most traditional organizations are highly centralized. b. In a decentralized organization, decision-making authority is delegated as far down the chain of command as possible. Decentralized authority allows the company to adapt more rapidly to customer needs. 4. Organizing marketing activities to align with the overall strategic marketing approach enhances organizational efficiency and performance. 5. A marketing department should clearly outline the hierarchical relationships between personnel and who is responsible for performing certain activities and making decisions.

Coordinating Marketing Activities

1. To achieve marketing objectives, marketing managers must coordinate actions within and across departments, firms, and external organizations to ensure that marketing activities align with other functions of the firm. 2. Marketing managers can improve coordination by making each employee aware of how his or her job relates to others and how his or her actions contribute to the achievement of marketing objectives.

Establishing a Timetable for Implementation

Successful marketing implementation requires that employees know the specific activities for which they are responsible and the timetable for completing each activity. Since scheduling can be a complicated task, some organizations use sophisticated computer programs to plan the timing of marketing activities.

Mission statement

a long-term view or vision of what the organization wants to become. An organization's mission really answers two questions: a. Who are our customers? b. What is our core competency?

Analysis of the marketing environment also includes identifying opportunities in the marketplace, which requires a solid understanding of the company's industry.

a. A market opportunity exists when the right combination of circumstances and timing permits an organization to take action to reach a particular target market. b. Strategic windows are temporary periods of optimal fit between the key requirements of a market and the particular capabilities of a firm competing in that market.

A company's mission, goals, and objectives must be properly implemented to achieve and communicate the desired corporate identity—a company's unique symbols, personalities, and philosophies.

a. An organization's goals and objectives, derived from its mission statement, guide its planning efforts. b. Goals focus on the end results sought by the organization.

Corporate strategy planners

concerned with broad issues such as organizational culture, competition, differentiation, diversification, interrelationships among business units, and environmental and social issues. They attempt to match the resources of the organization with the opportunities and threats in the environment.

Strategic performance evaluation

consists of establishing performance standards, measuring actual performance, comparing actual performance with established standards, and modifying the marketing strategy, if needed.

Market-growth/market-share matrix

developed by the Boston Consulting Group (BCG), is based on the philosophy that a product's market growth rate and its market share are important considerations in determining its marketing strategy. (1) All the organization's SBUs and products are integrated into a single matrix and compared and evaluated to determine appropriate strategies for individual products and overall portfolio strategies. (2) Managers use this model to determine and classify each product's expected future cash contributions and future cash requirements. (3) The BCG analytical approach is more of a diagnostic tool than a guide for making strategy prescriptions. (4) This model classifies an organization's products into four basic types

Strategic planning

helps a firm establish an organizational mission and formulate goals; corporate strategy, marketing objectives, and marketing strategy

Market

is a group of individuals and/or organizations that have needs for products in a product class and have the ability, willingness, and authority to purchase those products. The percentage of a market which actually buys a specific product from a particular company is referred to as that product's (or business unit's) market share.

SWOT analysis

is one tool marketers use to assess an organization's strengths, weaknesses, opportunities, and threats

marketing strategy

is the selection of a target market and the creation of a marketing mix that will satisfy the needs of target market members.

When an organization matches internal strengths to external opportunities

it creates competitive advantages in meeting the needs of its customers. Companies should attempt to convert internal weaknesses into strengths and external threats into opportunities.

Strategic planning @ corporate

often begins at the corporate level and proceeds downward to the business-unit and marketing levels However, organizations are increasingly developing strategies and conducting strategic planning that moves in both directions to seek expertise from multiple levels.

Strengths

refer to competitive advantages or core competencies that give the organization an advantage in meeting the needs of its target markets.

Corporate strategy

should be developed with the organization's overall mission in mind, business-unit strategy should be consistent with corporate strategy, and marketing strategy should be consistent with both.

Both strengths and weaknesses

should be examined from a customer perspective.

marketing objective

states what is to be accomplished through marketing activities. a. Objectives can be given in terms of product introduction, product improvement or innovation, sales volume, profitability, market share, pricing, distribution, advertising, or employee training activities. b. Objectives should be based on a careful study of the SWOT analysis, matching strengths to opportunities, eliminating weaknesses, and minimizing threats. c. Marketing objectives should: (1) Be expressed in clear, simple terms (2) Be measurable (3) Specify a time frame for its accomplishment (4) Be consistent with both business-unit and corporate strategies (5) Be achievable and use company resources effectively, and successful accomplishment should contribute to the overall corporate strategy

first-mover advantage

the ability of an innovative company to achieve long-term competitive advantages by being the first to offer a certain product in the marketplace. (1) Benefits include building a reputation as a market leader, reducing competition, establishing brand loyalty, and protecting trade secrets. (2) Risks include high costs associated with creating and marketing a new product, slower than predicted sales growth, and the potential for product failure.