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Strategic Planning and the Marketing Management Process I. The Marketing Concept • The marketing concept means that an organization should seek to achieve its goals by serving its

customers. • The purpose of the marketing concept is to rivet the attention of organizations on serving customer

needs and wants. This is called a market orientation, and it differs dramatically from a production orientation that focuses on making products and then trying to sell them to customers.

• The principal task of an organization with a market orientation is not to manipulate customers to do what suits its interests but rather to find effective and efficient means to satisfy the interests of customers.

• Effective marketing requires that customers come first in organizational decision making. • One qualification to this statement deals with the question of a conflict between consumer wants

and societal needs and wants. II. What is Marketing? • Everyone knows something about marketing because it has been a part of their lives since they

spent their first dollar. • Since everyone is involved in marketing, it seems strange that one of the persistent problems in the

field has been its definition. • The American Marketing Association defines marketing as, “the activity, set of institutions, and

processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”

• This definition takes into account all parties involved in the marketing effort: members of the producing organization, resellers of goods and services, and customers or clients.

III. What is Strategic Planning? • Before a production manager, marketing manager, and personnel manager can develop plans for

their individual departments, some larger plan or blueprint for the entire organization should exist. • Senior managers must look toward the future and evaluate their ability to shape their organization’s

destiny in the years and decades to come. o The output of this process is objectives and strategies designed to give the organization a

chance to compete effectively in the future. • The objectives and strategies established at the top level provide the context for planning in each of

the divisions and departments by divisional and departmental managers. A. Strategic Planning and Marketing Management • Some of the most successful business organizations are here today because many years ago they

offered the right product at the right time to a rapidly growing market. • More than three-quarters of the 100 largest U.S. corporations of 70 years ago have fallen from

the list. • These corporations at one time dominated their markets, controlled vast resources, and had the

best-trained workers. In the end, they all made the same critical mistake.

o Their managements failed to recognize that business strategies need to reflect changing environments and emphasis must be placed on developing business systems that allow for continuous improvement.

• Present-day business managers realize that the true mission of the organization is to provide value for three key constituencies: customers, employees, and investors.

• Strategic planning includes all the activities that lead to the development of a clear organizational mission, organizational objectives, and appropriate strategies to achieve the objectives for the entire organization.

• Strategic planning, if performed successfully, plays a key role in achieving equilibrium between the short and the long term by balancing acceptable financial performance with preparation for inevitable changes in markets, technology, and competition, as well as in economic and political arenas.

• The strategic planning process is depicted in Figure 1.2. • In the strategic planning process, the organization gathers information about the changing

elements of its environment. • This information is useful in aiding the organization to adapt better to these changes through the

process of strategic planning. B. The Strategic Planning Process • The output of the strategic planning process is the development of a strategic plan.

Organizational Mission • The organization’s environment provides the resources that sustain the organization, whether

it is a business, a college or university, or a government agency. • Every organization exists to accomplish something in the larger environment and that

purpose, vision, or mission usually is clear at the organization’s inception. • As time passes, the organization expands, and the environment and managerial personnel

change. As a result, one or more things are likely to occur: o The organization’s original purpose may become irrelevant as the organization

expands into new products, new markets, and even new industries. o The original mission may remain relevant, but managers begin to lose interest in it. o Changes in the environment may make the original mission inappropriate, as occurred

with the March of Dimes when a cure was found for polio. • The result of any or all three of these conditions is a “drifting” organization, without a clear

mission, vision, or purpose to guide critical decisions. o When this occurs, management must search for a purpose or emphatically restate and

reinforce the original purpose. • The mission statement, or purpose, of an organization is the description of its reason for

existence. o In essence, the mission statement defines the direction in which the organization is

heading and how it will succeed in reaching its desired goal. • The basic questions that must be answered when an organization decides to examine and

restate its mission are as follows: o What is the business? o Who are the customers? o What do customers value? o What will the business be?

• In developing a statement of mission, management must take into account three key

elements: the organization’s history, its distinctive competencies, and its environment. o The organization’s history—in formulating a mission, the critical characteristics and

events of the past must be considered. o The organization’s distinctive competencies—these are things that an organization

does well. o The organization’s environment—it dictates the opportunities, constraints, and threats

that must be identified before a mission statement is developed. • When completed, an effective mission statement will be focused on markets rather than

products, achievable, motivating, and specific. Focused on Markets Rather than Products • In recent years, a key feature of mission statements has been an external rather than

internal focus. o In other words, the mission statement should focus on the broad class of needs that

the organization is seeking to satisfy (external focus), not on the physical product or service that the organization is offering at present (internal focus).

Achievable • The mission statement should stretch the organization toward more effective

performance, it should, at the same time, be realistic and achievable. • In other words, it should open a vision of new opportunities but should not lead the

organization into unrealistic ventures far beyond its competencies. Motivational • One of the side (but very important) benefits of a well-defined mission is the guidance it

provides employees and managers working in geographically dispersed units and on independent tasks.

• It provides a shared sense of purpose outside the various activities taking place within the organization.

Specific • The mission statement must be specific to provide direction and guidelines to

management when they are choosing between alternative courses of action. • In other words, “to produce the highest-quality products at the lowest possible cost”

sounds very good, but it does not provide direction for management. Organizational Objectives • Organizational objectives are the end points of an organization’s mission and are what it

seeks through the ongoing, long-run operations of the organization. • The organizational mission is distilled into a finer set of specific and achievable

organizational objectives. These objectives must be specific, measurable, action commitments by which the mission of the organization is to be achieved.

• If formulated properly, they can accomplish the following: o They can be converted into specific action. o They will provide direction.

o They can establish long-run priorities for the organization. o They can facilitate management control because they serve as standards against which

overall organizational performance can be evaluated. • Organizational objectives are necessary in all areas that may influence the performance and

long-run survival of the organization. • Obviously, during the strategic planning process conflicts are likely to occur between various

functional departments in the organization. • The important point is that management must translate the organizational mission into

specific objectives that support the realization of the mission. Organizational Strategies • Strategy involves the choice of major directions the organization will take in pursuing its

objectives. • As many as 70 percent of strategic plans fail because the strategies in them are not well-

defined and, thus, cannot be implemented effectively.

Organizational Strategies Based on Products and Markets

• One means to developing organizational strategies is to focus on the directions the organization can take in order to grow.

• According to Figure 1.4, there are only four paths an organization can take in order to grow.

Market Penetration Strategies • These strategies focus primarily on increasing the sale of present products to present

customers. • Tactics used to implement a market penetration strategy might include price reductions,

advertising that stresses the many benefits of the product, packaging the product in different-sized packages, or making it available at more locations.

Market Development Strategies • Pursuing growth through market development, an organization would seek to find new

customers for its present products. • Market development strategies involve much, much more than simply getting the product

to a new market. Product Development Strategies • With this particular strategy, the new products developed would be directed primarily to

present customers. Diversification • This strategy can lead the organization into entirely new and even unrelated businesses. • It involves seeking new products (often through acquisitions) for customers not currently

being served.

Organizational Strategies Based on Competitive Advantage • Michael Porter developed a model for formulating organizational strategy that is

applicable across a wide variety of industries. • Porter suggests that firms should first analyze their industry and then develop either a cost

leadership strategy or a strategy based on differentiation. • Using a cost leadership strategy, a firm would focus on being the low-cost company in its

industry. • Using a strategy based on differentiation, a firm seeks to be unique in its industry or

market segment along particular dimensions that the customers value. Organizational Strategies Based on Value • As competition increases, the concept of “customer value” has become critical for

marketers as well as customers. • It focuses not only on customer needs, but also on the question, How can an organization

create value for their customers and still achieve their objectives? • It has become pretty clear that in today’s competitive environment it is unlikely that a

firm will succeed by trying to be all things to all people. o Many firms have succeeded by choosing to deliver superior customer value using

one of three value strategies—best price, best product, or best service. Choosing an Appropriate Strategy • Management should select those strategies consistent with its mission and capitalize on the

organization’s distinctive competencies that will lead to a sustainable competitive advantage. • A sustainable competitive advantage can be based on either the assets or skills of the

organization. Organizational Portfolio Plan • The final phase of the strategic planning process is the formulation of the organizational

portfolio plan. • Management must decide which businesses to build, maintain, or eliminate, or which new

businesses to add. • The first step in this approach is to identify various divisions, product lines, and so on that

can be considered a “business.” • When identified, these are referred to as strategic business units (SBUs) and have the

following characteristics: o They have a distinct mission. o They have their own competitors. o They are a single business or collection of related businesses. o They can be planned independently of the other businesses of the total organization

• Thus, depending on the type of organization, an SBU could be a single product, product line, or division; a college of business administration; or a state mental health agency.

C. The Complete Strategic Plan • Figure 1.2 indicates that at this point the strategic planning process is complete, and the

organization has a time-phased blueprint that outlines its mission, objectives, and strategies.

• Completion of the strategic plan facilitates the development of marketing plans for each product, product line, or division of the organization.

• The marketing plan serves as a subset of the strategic plan in that it allows for detailed planning at a target market level.

IV. The Marketing Management Process • Marketing management can be defined as “the process of planning and executing the conception,

pricing, promotion, and distribution of goods, services, and ideas to create exchanges with target groups that satisfy customer and organizational objectives.”

• This definition is entirely consistent with the marketing concept, since it emphasizes serving target market needs as the key to achieving organizational objectives.

• The marketing management process is illustrated in Figure 1.5. A. Situation Analysis • The situation analysis can be divided into six major areas of concern: (1) the cooperative

environment, (2) the competitive environment, (3) the economic environment, (4) the social environment, (5) the political environment, and (6) the legal environment. The Cooperative Environment • It includes all firms and individuals who have a vested interest in the firm’s

accomplishing its objectives. • Parties of primary interest to the marketing executive in this environment are:

o Suppliers o Resellers o Other departments in the firm o Subdepartments and employees of the marketing department

• Opportunities in this environment are primarily related to methods of increasing efficiency.

The Competitive Environment • It includes primarily other firms in the industry that rival the organization for both

resources and sales. • Opportunities in this environment include the following things:

o Acquiring competing firms o Offering demonstrably better value to consumers and attracting them away from

competitors o In some cases, driving competitors out of the industry

The Economic Environment • The state of the macroeconomy and changes in it also bring about marketing

opportunities and constraints. • Changes in technology can provide significant threats and opportunities.

The Social Environment • This environment includes general cultural and social traditions, norms, and attitudes. • While these values change slowly, such changes often bring about the need for new

products and services. The Political Environment • The political environment includes the attitudes and reactions of the general public, social

and business critics, and other organizations, such as the Better Business Bureau. • Dissatisfaction with such business and marketing practices as unsafe products, products

that waste resources and unethical sales procedures can have adverse effects on corporation image and customer loyalty.

The Legal Environment • This environment includes a host of federal, state, and local legislation directed at

protecting both business competition and consumer rights. • In recent years, there has been less emphasis on creating new laws for constraining

business practices. B. Marketing Planning • Once an opportunity is recognized, the marketing executive must then plan an appropriate

strategy for taking advantage of the opportunity. • This process can be viewed in terms of the following three interrelated tasks:

o Establishing marketing objectives o Selecting the target market o Developing the marketing mix

Establishing Objectives • Marketing objectives usually are derived from organizational objectives; in some cases

where the firm is totally marketing oriented, the two are identical. • Marketing objectives are usually stated as standards of performance or as tasks to be

achieved by given dates. Selecting the Target Market • The success of any marketing plan hinges on how well it can identify customer needs and

organize its resources to satisfy them profitably. • The following four important questions must be answered in selecting the groups of

potential customers: o What do customers want or need? o What must be done to satisfy these wants or needs? o What is the size of the market? o What is its growth profile?

• Present target markets and potential target markets are then ranked according to: o Profitability o Present and future sales volume

o The match between what it takes to appeal successfully to the segment and the organization’s capabilities

Developing the Marketing Mix • The marketing mix is the set of controllable variables that must be managed to satisfy the

target market and achieve organizational objectives. • These controllable variables are usually classified according to four major decision areas:

o Product o Price o Promotion o Place

C. Implementation and Control of the Marketing Plan • Implementing the marketing plan involves putting the plan into action and performing

marketing tasks according to the predefined schedule. • Controlling the marketing plan involves the following three steps:

o The results of the implemented marketing plan are measured o The results are compared with objectives o Decisions are made on whether the plan is achieving objectives

D. Marketing Information Systems and Marketing Research • Throughout the marketing management process, current, reliable, and valid information is

needed to make effective marketing decisions. • Providing this information is the task of the marketing information system and marketing

research. V. The Strategic Plan, the Marketing Plan, and Other Functional Area Plans • Strategic planning is a top-management responsibility. • In recent years, there has been an increasing shift toward more active participation by marketing

managers in strategic analysis and planning. • Nearly all strategic planning questions have marketing implications. • Marketing executives are involved in the strategic planning process in at least the follwoing two

important ways: o They influence the process by providing important inputs in the form of information and

suggestions relating to customers, products, and middlemen. o They must always be aware of what the process of strategic planning involves as well as the

results because everything they do—the marketing objectives and strategies they develop— must be derived from the strategic plan.

A. Marketing’s Role in Cross-Functional Strategic Planning • More and more organizations are rethinking the traditional role of marketing. Rather than

dividing work according to function (e.g., production, finance, technology, human resources), they are bringing managers and employees together to participate in cross-functional teams.

• Rather than making decisions independently, marketing managers work closely with team members from production, finance, human resources, and other areas to devise plans that

address all concerns. • The greatest advantage of strategic planning with a cross-functional team is the ability of team

members to consider a situation from a number of viewpoints. • In well-managed organizations, a direct relationship exists between strategic planning and the

planning done by managers at all levels. • If done properly, strategic planning results in a clearly defined blueprint for management action

in all functional areas of the organization. • Figure 1.7 clearly illustrates this blueprint using only one organizational objective and two

strategies from the strategic plan and illustrating how these are translated into elements of the marketing department plan and the production department plan.