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Planning, Implementing, and Controlling Marketing Strategies

Chapter 2

Strategic Planning

Increasing competition means companies have to spend more time on strategic planning: How to use the firm’s resources to achieve objectives and satisfy the customer…the marketing concept

Through the Strategic Planning Process

  • a firm establishes an organizational mission and goals,
  • corporate strategy,
  • marketing objectives,
  • marketing strategy and
  • a marketing plan.
  • The strategic plan should be guided by a concern for customer satisfaction.

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Components of the Strategic Planning Process

Organizational Mission Statements and Goals

  • A mission statement is a long-term view, or vision, of what the organization wants to become
  • The goals of any organization should derive from its mission statement
  • An organization’s mission statement should answer two questions:
  • Who are our customers?
  • What is our core competency?

Corporate Identity

Corporate identity—unique symbols, personalities, and philosophies designed to support all the firm’s activities.

Managing identity requires:

  • Broadcasting a company’s mission, goals, and values
  • Sending a consistent image
  • Implementing a visual identity with stakeholders

Level of Strategic Planning

Mission Statement

Corporate Strategy

Business-Unit Strategy

Marketing Strategy

Marketing Mix

Elements

I. A mission statement

Is a long-term view, or vision, of what the organization wants to become.

  • It gives direction by answering the question, “Who are our customers?” “What is our core competency?”
  • It provides direction only, not a detailed plan.

II. Developing Corporate Strategies

  • It starts at the corporate level with corporate strategy,
  • a plan for using resources in marketing, production, finance, R&D, and human resources in an effort to reach the organization’s goals.

Corporate strategy planners are concerned with

  • Organizational culture
  • Competition
  • Differentiation
  • Diversification
  • Interrelationships among business units
  • Environmental and social issues
  • They attempt to match the resources of the organization with the opportunities and threats in the environment

III. Business Unit Strategies...

  • A strategic business unit (SBU) is a division, product line, or other profit center within the company.
  • The revenues, costs, investment, and strategic plans of each SBU are separate from each other and can be individually evaluated.
  • SBUs have differing growth rates, opportunities, competition, and profit scenarios.
  • A tool used to evaluate this is the BCG Matrix…some definitions first…

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What is a market?

It’s a group of individuals who have needs for a product in a product class and have the

  • ability,
  • willingness,
  • and authority

to purchase those products.

What is market share?

  • It’s the percentage of a market that actually buys a specific product from a particular company, e.g., H-E-B’s market share.
  • Market growth and market share are the two axis used in the Boston Consulting Group’s matrix.
  • Strategic planners allocate scarce resources among strategic business units (SBUs).

GROWTH SHARE MATRIX DEVELOPED BY THE BOSTON CONSULTING GROUP

figure 2.3

Boston Consulting Group’s market-growth/market-share matrix

  • Enables a company to classify its products.
  • A product’s market growth rate and its market share are important considerations in determining its marketing strategy.
  • Using the BCG matrix, market share determines a product’s future cash contributions and cash requirements.
  • How much can we invest in this product and how much cash will it need in the future?

Stars...

  • Have a dominant share of the market,
  • good prospects for growth,
  • use more cash than they generate,
  • add capacity, and
  • increase market share.
  • Examples???

Cash cows...

  • Have a dominant share of the market but
  • low prospects for growth.
  • Typically generate more cash than is required to maintain market share.

Dogs...

  • Poor or subordinate share of the market and
  • low prospects for growth.
  • Deliver cash or otherwise liquidate.
  • Products are often found in established markets.

Question marks...

  • Have a small share of a growing market and
  • require a large amount of cash to build market share.
  • Either invest heavily, sell it off, or invest nothing, and generate whatever cash is possible.

Organizations need products that generate cash, profit, and are potential stars.

Market Growth/ Market Share Matrix for
Coca-Cola

Look at the following Coca-Cola products. Determine whether they qualify as dogs, cash cows, stars, or question marks.

  • Coca-Cola soft drink
  • Energy drink Full Throttle
  • Hi-C juice drink
  • Dasani Bottled Water
  • Odwalla
  • Fanta

Competitive Growth Strategies

After analyzing each product or business unit a firm may want to increase sales…

Competitive
Growth Strategies

Competitive Growth Strategies

  • Market penetration is a strategy of increasing sales in current markets with current products
  • Under Armor sells athletic footwear, clothing, and accessories, and maintains a leadership position in the market.
  • Market development is a strategy of increasing sales of current products in new markets
  • Yum Brands introduction of Pizza Hut in South Africa
  • Sephora introduces products in China, 2010.

Competitive Growth Strategies

  • Product development is a strategy of increasing sales by improving present products or developing new products for current markets
  • Apple introduced a smartwatch to their line
  • Diversification allows firms to make better and wider use of their managerial, technological, and financial resources
  • Coke’s 2018 purchase of Topo Chico
  • Coke’s development of Fairlife, a milk product.

Now the firm is ready to begin planning…

  • The Strategic Planning Process begins with an analysis of the marketing environment: P, E, S, T, C, L/R forces that can
  • threaten and influence the firm’s goals and
  • create favorable opportunities.

Assess the firm’s resources and opportunities…

  • the organization’s financial and human resources and capabilities,
  • goodwill, reputation, and brand names,
  • and core competencies… the things a firm does extremely well.
  • How will they change in the future?

What are the core competencies?

  • The things a firm does extremely well which give it an advantage over competition
  • McDonald’s consistent fast food quality
  • Starbuck’s gourmet coffee drinks
  • BMW’s production of sporty, luxury automobiles
  • Apple’s trendy, desirable electronics devices

Analysis also involves opportunities in the marketplace...

  • Market opportunities exist when the right combination of circumstances and timing allow a company to reach a particular target market.
  • China and India offer a large market opportunity with a large potential market and a growing middle class, e.g. tech firms.
  • McDonald’s line of latte drinks, Sigg’s line of water bottles.

Is Toyota’s Tundra a good example of a market opportunity? Why? Why not?

Opportunities like this are often called strategic windows - temporary periods of optimum fit between the market’s needs and the firm’s capabilities in that market.

A sustainable competitive advantage occurs when

A company has matched its core competency to opportunities it has discovered in the marketplace.

  • It’s a strength that cannot be copied in the near future.
  • The product can be cheaper, more widely available, stronger service support, higher quality, etc.
  • Trader Joe’s competitive advantage?

Customers want fewer choices, low prices for high-quality products, the company's brand. Customers trust the brand.

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2–*

Assessing Organizational Resources and Opportunities

Core
Competencies

Strategic
Windows

Market
Opportunities

Competitive
Advantage

The place where opportunities, core competencies

and strategic windows meet.

I. The strategic planning process begins with an analysis of the marketing environment….

It analyses the organization’s strengths, weaknesses and identifies opportunities and threats within the marketing environment (SWOT analysis).

1. Strengths

  • Strengths refer to core competencies and competitive advantages that give the firm an advantage in meeting its target market needs.
  • They are internal.
  • ‘Strengths’ should be customer-focused. Do the strengths meet the customer’s needs? How do they help the company reach its objectives?

Strategic planning begins with an assessment of the

external environmental factors

SWOT Analysis

2. Weaknesses

  • Are internal limitations a company faces in developing or implementing a marketing strategy, e.g., Pepsi and Coke are experiencing declining market share as people lose interest in “carbonates” as a category.
  • Walmart’s weaknesses in online sales and technological innovation.
  • Weaknesses should be examined from a customer perspective as they often perceive weaknesses that a company cannot see.
  • Strengths and weaknesses are internal factors that give an organization certain advantages and disadvantages in meeting target market needs.
  • Opportunities and threats exist in the external environment (external); they exist independently of the firm and affect operations.

3. Opportunities

  • Refer to favorable conditions in the environment that could produce rewards for the organization if acted upon properly.
  • Green products and services, Avis and Zipcar (car sharing), Millenials prefer ‘experiences’ over ‘things.’ Airbnb, Uber and Lyft. Others?

4. Threats

  • Refer to conditions or barriers that may prevent the firm from reaching its objectives, e.g., revisions to NAFTA.
  • The president has imposed tariffs on solar panels, washing machines, steel (25%) and aluminum (10%) from the European Union, Canada and Mexico.
  • The tariffs angered trading partners, who implemented retaliatory tariffs on U.S. goods, e.g., Harley.

4. Threats

  • 25 percent tariff on imports of U.S. liquefied natural gas, a major blow to an emerging American business.
  • American farms find it difficult to stay price competitive with retaliatory tariffs.
  • The recent tariffs on newsprint jeopardize U.S. newspapers’ ability to operate profitably.

New York Times, Aug. 8, 2018

The Four-Cell SWOT Matrix

You are opening a gluten-free restaurant. You decide to perform a SWOT analysis. Classify the following statements as strengths, weaknesses, opportunities, or threats.

  • Gluten allergies are rising in the U.S.
  • You have hired a talented cook specializing in gluten-free recipes.
  • A popular restaurant in your town has recently begun offering several gluten-free menu options.
  • You do not have the money to purchase new kitchen equipment, so you have to make do with used equipment.
  • More and more people are viewing gluten as unhealthy.
  • You do not have any money for marketing.
  • There is a recession and more people are opting not to eat out.
  • Your recipes are unique and are hard to copy.

First Mover Advantage

  • First-mover advantage – creative companies can achieve a long-term competitive advantage by being first in the marketplace
  • It builds a company’s reputation as a pioneer and market leader.
  • Market is free of competition.
  • Company can protect its trade secrets or technology through patents.

First-Mover Risks – being first has its problems

  • High cost associated with creating a new product
  • Market research, product development, production, and marketing costs
  • Product may fail due to market uncertainty; it may not meet consumer’s expectations or needs.

Razor is spending up to $1 million per week to sue unauthorized manufacturers. Its patent has been difficult to enforce.

Late Mover Advantage

Late market entrants can also achieve long-term competitive advantages.

  • Learn from first mover’s mistakes and thus create an updated/improved product design and marketing strategy, e.g., Facebook learned from the mistakes of Myspace.

  • Lower initial costs since first mover has developed an infrastructure and educated buyers about the product

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Late Mover Risks

  • First mover may have technology patents that prevent the late mover from reverse engineering its product or producing a product that is too similar.
  • For the customer, switching to the late mover’s product is too expensive or time-consuming.
  • Timing determines the amount of late-mover advantage that is actually possible.

“After a splash launch, Amazon’s smartphone failed to catch on, making a big disappointment for the online retailing giant.”

Marketing objectives

  • Are based on the SWOT analysis and should turn strengths into opportunities and convert weaknesses or threats.
  • Should be clear, measurable, and specify a time for accomplishment and
  • be consistent with SBU and corporate strategy.

With this information, a company can establish or revise its mission and goals, then develop corporate strategies to achieve those goals.

It should begin to develop a marketing strategy.

IV. Marketing Strategies

  • First, select a target market,
  • then create the marketing mix.
  • Marketing mix decisions should be
  • consistent with business unit and corporate strategies and
  • flexible enough to respond to changes in market conditions, competition, and customer needs.
  • A sustainable competitive advantage means the competition can’t copy it in the foreseeable future.
  • Amazon’s shipping relies on advanced logistics and an extensive network of distribution centers.

Marketing Implementation asks...

  • What specific actions will be taken?
  • How will these activities be performed?
  • When will these activities be performed?
  • Who is responsible for the completion of these activities?
  • how much will these activities cost?

V. Creating the Marketing Plan

  • A systematic process of evaluating marketing opportunities and resources,
  • determining marketing objectives,
  • defining marketing strategies, and
  • establishing guidelines for implementation and control of the marketing program.
  • “Seat of your pants” strategies are no longer an option.

The outcome is the Marketing Plan

  • It outlines and explains all the activities necessary to implement and evaluate marketing strategies for one year.
  • They can be short-range, long range, and are always modifiable.
  • Planning is necessary to develop, coordinate, and control marketing activities effectively.

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Components of the Marketing Plan

  • Executive summary – a synopsis of the entire marketing plan; an overview; furnished to people outside the organization, e.g., bankers, suppliers, investors.

Lastly…evaluation and control

  • Standards assess the actual performance. Differences between planned and actual performance need to be monitored.
  • A marketing audit isolates weaknesses in the marketing plan and recommends actions to improve performance.

Using BCG’s product-portfolio analysis, how would you classify the following products?

  • Toyota Camry

cash cow

  • Fitbit

star

  • Colgate’s Total toothpaste

cash cow

  • BlackBerry phones
  • Bounty paper towels

cash cow

  • Landlines

  • Miller Light

cash cow

  • Black and white televisions

dog

  • L.A. Lakers

dogs

  • Spurs

?

  • Nissan’s Leaf ElectricVehicle

?

  • Kodachrome
  • dog