CHAPTER 2

Planning, Implementing, and Controlling Marketing Strategies

Lecture Outline

(Transparency Figure 2A: Chapter Outline)

I. Understanding the Strategic Planning Process

(Transparency Figure 2.1)

Through the process of strategic planning, a firm establishes an organizational mission and goals, corporate strategy, marketing objectives, marketing strategy, and, finally, a marketing plan.

A. The process begins with a detailed analysis of the organizationís strengths and weaknesses and identification of opportunities and threats within the marketing environment.

B. Based on this analysis, the firm can establish or revise its mission and goals, and then develop corporate strategies to achieve these goals.

C. Next, each functional area of the organization (marketing, production, finance, human resources, etc.) establishes its own objectives and develops strategies to achieve them.

D. In the marketing area, marketing objectives should be designed so that their achievement will contribute to the corporate strategy and so that they can be accomplished through efficient use of the firmís resources.

E. To achieve its marketing objectives, an organization must develop a marketing strategy, which includes identifying and analyzing a target market and developing a marketing mix to satisfy individuals in that market.

(Transparency Figure 2B)

F. The strategic planning process ultimately yields a marketing strategy that is the framework for a marketing plan, which is a written document that specifies the activities to be performed to implement and control an organizationís marketing activities.

II. Assessing Organizational Resources and Opportunities

A. The strategic planning process begins with an analysis of the marketing environment. Economic, competitive, political, legal and regulatory, technological, and sociocultural forces can constrain an organization and influence its overall goals; they can also create favorable opportunities.

B. Any strategic planning effort must assess an organizationís available financial and human resources and capabilities, as well as how the level of these is likely to change in the future.

1. Resources can also include goodwill, reputation, and brand names.

2. Resources also include core competenciesóthings a firm does extremely wellósometimes so well that they give the company an advantage over its competition.

C. Analysis of the marketing environment also involves identification of opportunities in the marketplace.

1. When the right combination of circumstances and timing permits an organization to take action to reach a particular target market, a market opportunity exists.

(Transparency Figure 2C)

2. Strategic windows are temporary periods of optimum fit between the key requirements of a market and the particular capabilities of a firm competing in that market.

D. When a company matches a core competency to opportunities it has discovered in the marketplace, it is said to have a competitive advantage.

(Transparency Figure 2D)

E. SWOT Analysis

One tool marketers use to assess an organizationís strengths, weaknesses, opportunities, and threats is the SWOT analysis.

(Transparency Figure 2B)

1. Strengths and weaknesses are internal factors that can influence an organizationís ability to satisfy its target markets.

a) "Strengths" refer to competitive advantages or core competencies that give the firm an advantage in meeting the needs of its target markets.

b) "Weaknesses" refer to any limitations that a company faces in developing or implementing a marketing strategy.

c) Both strengths and weaknesses should be examined from a customer perspective because they are meaningful only when they help or hinder the firm in meeting customer needs.

2. Opportunities and threats exist independently of the firm and therefore represent issues to be considered by all organizations, even those that are not competitors.

a) "Opportunities" refer to favorable conditions in the environment that could produce rewards for the organization if acted upon properly.

b) "Threats" refer to conditions or barriers that may prevent the firm from reaching its objectives.

(Transparency Figure 2.2)

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3. When an organization matches internal strengths to external opportunities, it creates competitive advantages in meeting the needs of its customers.

4. Companies should also act to convert internal weaknesses into strengths and external threats into opportunities.

III. Establishing an Organizational Mission and Goals

A. The goals of any organization should be derived from its mission statement, which is a long-term view, or vision, of what the organization wants to become. An organizationís mission really answers two questions:

1. Who are our customers?

2. What is our core competency?

B. An organizationís goals and objectives, derived from its mission statement, guide the remainder of its planning efforts.

1. Goals focus on the end results sought by the organization.

2. A marketing objective states what is to be accomplished through marketing activities.

a) Marketing objectives should be based on a careful study of the SWOT analysis and should relate to matching strengths to opportunities and/or the conversion of weaknesses or threats.

b) Marketing objectives should

(1) be expressed in clear, simple terms so that all marketing personnel understand exactly what they are trying to achieve.

(2) be written so that they can be measured accurately.

(3) specify a time frame for accomplishment.

(4) be consistent with both business-unit and corporate strategy.

IV. Developing Corporate, Business-Unit, and Marketing Strategies

In any organization, strategic planning begins at the corporate level and proceeds from there to the business-unit and marketing levels.

(Transparency Figure 2.3)

A. Corporate Strategy

(Transparency Figure 2B)

1. Corporate strategy determines the means for utilizing resources in the functional areas of marketing, production, finance, research and development, and human resources to reach the organizationís goals.

a) Corporate strategy determines not only the scope of the business, but also its resource deployment, competitive advantages, and overall coordination of functional areas.

b) Corporate strategy is used by all organizations, not just corporations.

2. Corporate strategy planners are concerned with broad issues such as corporate culture, competition, differentiation, diversification, interrelationships between business units, and environmental and social issues.

a) They attempt to match the resources of the organization with the opportunities and threats in the environment.

b) They are also concerned with defining the scope and role of the firmís business units so that they are coordinated to reach the ends desired.

A. Business-Unit Strategy

The next step in strategic planning is to determine future business directions and develop strategies for individual business units.

1. A strategic business unit (SBU) is a division, product line, or other profit center within the parent company. Strategic planners should recognize the strategic performance capabilities of each SBU and carefully allocate resources among the divisions.

2. Several tools allow a firmís portfolio of strategic business units, or even individual products, to be classified and visually displayed according to the attractiveness of various markets and the businessís relative market share within those markets.

a) A 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 these products.

b) The percentage of a market that actually buys a specific product from a specific company is referred to as that productís (or business unitís) market share.

3. The market-growth/market-share matrix, the Boston Consulting Group (BCG) approach, is based on the philosophy that a productís market growth rate and its market share are important considerations in determining its marketing strategy.

a) All the firmís SBUs and products should be integrated into a single, overall matrix and evaluated to determine appropriate strategies for individual products and overall portfolio strategies.

b) Managers can use this model to determine and classify each productís expected future cash contributions and future cash requirements.

c) Figure 2.4, based on work by the BCG, classifies a firmís products into four basic types:

(Transparency Figure 2.4)

(1) "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.

(2) "Cash cows" have a dominant share of the market but low prospects for growth; typically they generate more cash than is required to maintain market share.

(3) "Dogs" have a subordinate share of the market and low prospects for growth; these products are often found in established markets.

(4) "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.

d) The long-term health of an organization depends on having some products that generate cash (and provide acceptable profits) and others that use cash to support growth.

B. Marketing Strategy

The next phase in strategic planning is the development of strategies for each functional area of the organization.

1. Within the marketing area, a strategy is typically designed around two components: (1) the selection of a target market and (2) the creation of a marketing mix that will satisfy the needs of the chosen target market.

2. Target Market Selection

(Transparency Figure 2E)

a) The target market has to be chosen before the organization can adapt its marketing mix to meet this marketís needs and preferences.

(1) Should a company select the wrong target market, all other marketing decisions will be a waste of time.

(2) Identification and analysis of a target market provide a foundation on which a marketing mix can be developed.

b) When exploring possible target markets, marketing managers try to evaluate how entering them would affect the companyís sales, costs, and profits.

c) Marketers should also assess whether the company has the resources to develop the right mix of product, price, promotion, and distribution to meet the needs of a particular target market.

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3. Creating the Marketing Mix

a) The decisions made in creating a marketing mix are only as good as the organizationís understanding of the target market.

(1) This understanding typically comes from careful, in-depth research into the characteristics of the target market.

(2) While demographic information is important, the organization should also analyze customer needs, preferences, and behavior with respect to product design, pricing, distribution, and promotion.

b) Marketing mix decisions should also have two other characteristics:

(1) All marketing mix decisions should be consistent with the business-unit and corporate strategies; this allows the organization to achieve its objectives on all three planning levels.

(2) All marketing mix decisions should be flexible to permit the organization to alter its marketing mix in response to changes in market conditions, competition, and customer needs

c) It is at the marketing mix level that a firm details how it will achieve a competitive advantage.

d) It is important that the firm attempt to make this advantage sustainable. A sustainable competitive advantage is one that cannot be copied by the competition.

V. Creating the Marketing Plan

A major concern in the strategic planning process is marketing planning, the systematic process of assessing marketing opportunities and resources, determining marketing objectives, defining marketing strategies, and establishing guidelines for implementation and control of the marketing program.

A. The outcome of this process is the development of a marketing plan, a written document that outlines and explains all the activities necessary to implement marketing strategies. It describes the firmís current position or situation, establishes marketing objectives for the product or product group, and specifies how the organization will attempt to achieve these objectives.

B. Developing a clear, well-written plan, though time consuming, is important.

1. It is the basis for internal communication among employees.

2. It covers the assignment of responsibilities and tasks, as well as 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.

C. Organizations use many different formats when devising marketing plans, which may be written for strategic business units, product lines, individual products or brands, or specific markets. Most plans share some common components, as shown in Table 2.2.

VI. Implementing Marketing Strategies

A. Marketing implementation is the process of putting marketing strategies into action.

1. Although implementation is often neglected in favor of strategic planning, the implementation process itself can determine whether a marketing strategy succeeds.

2. Marketing strategies almost always turn out differently than expected. In essence, organizations have two types of strategy.

a) Intended strategy is the strategy the organization decided on during the planning phase and wants to use.

b) Realized strategy is the strategy that actually takes place. It comes about during the process of implementing the intended strategy.

B. Approaches to Marketing Implementation

1. Internal Marketing

a) Organizations effectively have two sets of customers:

(1) External customers are the individuals who patronize a business.

(2) Internal customers are the employees who work for a company.

(3) The needs of both sets of customers must be satisfied through marketing activities if implementation is to be successful.

b) Internal marketing is a management philosophy that coordinates internal exchanges between the organization and its employees to achieve successful external exchanges between the organization and its customers.

c) Internal marketing refers to the managerial actions necessary to make all members of the marketing organization understand and accept their roles in implementing the marketing strategy.

d) Internal marketing may involve market segmentation, product development, research, distribution, and public relations and sales promotion.

2. Total Quality Management

Total quality management (TQM) is a philosophy that uniform commitment to quality in all areas of the organization will promote a culture that meets customersí perceptions of quality.

a) TQM involves coordinating efforts at improving customer satisfaction, increasing employee participation and empowerment, forming and strengthening supplier partnerships, and facilitating an organizational culture of continuous quality improvement.

b) TQM requires continuous quality improvement and employee empowerment.

(1) Continuous quality improvement is built around the notion that quality is free and involves building in quality from the very beginning. An important tool is benchmarking, the measuring and evaluating of the quality of an organizationís goods, services, or processes as compared with the best-performing companies in the industry.

(2) Empowerment gives customer-contact employees the authority and responsibility to make marketing decisions without seeking the approval of their supervisors.

C. Organizing Marketing Activities

1. Firms that truly adopt the marketing concept develop a distinct organizational cultureóa culture based on a shared set of beliefs that makes the customerís needs the pivotal point of a firmís decisions about strategy and operations.

(Transparency Figure 2F)

2. If the marketing concept serves as a guiding philosophy, the marketing unit will be closely coordinated with other functional areas such as production, finance, and human resources.

3. The organizational structure of a marketing department establishes the authority relationships among marketing personnel and specifies who is responsible for making certain decisions and performing particular activities.

a) A centralized organization is one in which the top-level managers delegate very little authority to lower levels of the organization.

b) A decentralized organization delegates authority as far down the chain of command as possible.

4. There is no single best approach to organizing the marketing unit; the best approach(es) depends on the number and diversity of the firmís products, the characteristics and needs of the people in the target market, and many other factors.

5. A marketing unit can be organized according to functions, products, regions, or types of customers; it can also be organized using a combination of these approaches.

a) Organizing by Functions

(1) Some marketing departments are organized by general marketing functions, such as marketing research, product developments, distribution, sales, advertising, and customer relations.

(2) The functional structure is fairly common because it works well for some businesses with centralized marketing operations; however, it can cause serious coordination problems in more decentralized firms.

b) Organizing by Products

(1) Organizing by product is appropriate for firms that produce and market diverse products.

(2) This structure gives a firm the flexibility to develop special marketing mixes for different products.

(3) Although this approach can be flexible, it can be also rather expensive unless efficient categories of products are grouped together to reduce duplication and improve coordination of product management.

c) Organizing by Regions

(1) Organizing by region is appropriate for large firms that market products nationally or internationally.

(2) This structure is effective for firms whose customersí characteristics and needs vary greatly from one region to another.

d) Organizing by Types of Customers

Organizing by types of customers is appropriate for a firm that has several groups of customers whose needs and problems differ significantly.

D. Controlling Marketing Activities

The formal marketing control process consists of establishing performance standards, evaluating actual performance by comparing it with established standards, and reducing the differences between desired and actual performance.

(Transparency Figure 2.5)

1. Establishing Performance Standards

a) Planning and controlling are closely linked because plans include statements about what is to be accomplished.

b) A performance standard is an expected level of performance against which actual performance can be compared.

c) Performance standards should be tied to organizational goals.

2. Evaluating Actual Performance

a) Marketing managers must know what employees are doing and have information about the activities of external organizations that provide the firm with marketing assistance.

b) Records of actual performance are compared with performance standards to determine whether and how much of a discrepancy exists.

3. Taking Corrective Action

a) Marketing managers have several options for reducing a discrepancy between performance standards and actual performance:

(1) Improve actual performance

(2) Reduce or totally change the performance standard

(3) Do both

b) Improving performance may require better methods of motivating marketing personnel or more effective techniques for coordinating marketing efforts.

4. Problems in Controlling Marketing Activities

a) The information required to control marketing activities may be unavailable or available only at a high cost.

b) The frequency, intensity, and unpredictability of environmental changes may hamper control.

c) The time lag between marketing activities and their results limits a marketerís ability to measure the effectiveness of specific marketing activities.

d) Because marketing and other business activities overlap, marketing managers cannot determine the precise cost of marketing activities, which makes it difficult to know if the outcome of marketing activities is worth the expense.

e) It is very hard to develop exact performance standards for marketing personnel.