Unit 1: Analysis Assignment
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Unit1_Chapter2PowerPoint.pptPrinciples of Marketing 4.0
Jeff Tanner and Mary Anne Raymond
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CHAPTER 2
Strategic Planning
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LEARNING OBJECTIVE
Explain the meaning of a value proposition.
Understand why a company may develop different value propositions for different target markets.
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THE VALUE PROPOSITION
It shows why the good is superior to competing goods.
The value proposition answers the questions:
“why should I buy from you?”
“why should I hire you?”
THIRTY-SECOND “ELEVATOR SPEECH” STATING THE SPECIFIC BENEFITS A PRODUCT OR SERVICE OFFERING PROVIDES A BUYER
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THE VALUE PROPOSITION
Firms identify their target markets when they are developing their value propositions.
The value proposition tells each group why they should buy a product or service.
Once the benefits are clear, firms must develop strategies that support the value proposition.
The value proposition serves as a guide for this process.
Individuals and students should also develop their own personal value propositions.
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THE VALUE PROPOSITION
The acronym S.O.R.E. is beneficial for developing value propositions:
Simplifier: take complex scenarios and simplify them so that everyone can understand.
Organizer: take the lead in organizing opportunities.
Resolver: work towards efficient and effective resolutions to achieve results.
Executor: take pride in executing to achieve results.
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KEY TAKEAWAYS
A value proposition is a thirty-second “elevator speech” stating the specific value a product or service provides to a target market.
Firms may develop different value propositions for different groups of customers.
The value proposition shows why the product or service is superior to competing offers and why the customer should buy it or why a firm should hire you.
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LEARNING OBJECTIVES
Explain how a mission statement helps a company with its strategic planning.
Describe how a firm analyzes its internal environment.
Describe the external environment a firm may face and how it is analyzed.
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STRATEGIC PLANNING
Typically, it is a long-term process.
The strategic planning process includes:
Conducting a situation analysis
Developing the organization’s:
Mission statement objectives
Value proposition
Strategies
PROCESS THAT HELPS AN ORGANIZATION ALLOCATE ITS RESOURCES TO CAPITALIZE ON OPPORTUNITIES IN THE MARKETPLACE
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THE STRATEGIC PLANNING PROCESS
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CONDUCTING A SITUATION ANALYSIS
A situation analysis must be conducted before a company can decide on specific actions.
A situation analysis involves analyzing:
The external (macro and micro factors outside the organization)
The internal (company) environments
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CONDUCTING A SWOT ANALYSIS
Organizations conduct a SWOT analysis by analyzing:
Strengths
Weaknesses
Opportunities
Threats
Strengths and weaknesses:
Internal factors
Somewhat controllable
Opportunities and threats:
External factors
Largely uncontrollable
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CONDUCTING A SWOT ANALYSIS
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ASSESSING THE INTERNAL ENVIRONMENT
Companies can use their strengths to capitalize on opportunities and develop their competitive advantage.
Managers need to examine both the past and current strategies to determine what strategies succeeded and which ones failed.
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INTERNAL SWOT ANALYSIS
Actions required:
Capitalize on a strength
Address a weakness
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ASSESSING THE EXTERNAL ENVIRONMENT
Analyzing the external environment involves tracking conditions in the macro and micro marketplace.
The macro environment includes:
Economic factors
Demographic trends
Cultural and social trends
Political and legal regulations
Technological changes
The price and availability of natural resources
The micro environment includes:
Competition
Suppliers
Marketing intermediaries (retailers, wholesalers)
The public
The company
Customers
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EXTERNAL SWOT ANALYSIS
Actions required:
Stay informed on global markets and issues
Anticipate and prepare for government actions
Monitor technology advances
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THE COMPETITIVE ENVIRONMENT
Both nonprofit and for-profit organizations compete for customers’ resources.
An industry is group of competitors that provide similar products or.
Michael Porter developed an approach for analyzing industries called the five forces model.
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FIVE FORCES MODEL
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COMPETITIVE ANALYSIS
When a firm conducts a competitive analysis, it focuses on direct competitors and tries to determine their strengths and weaknesses, image, and resources.
Competitive analysis involves looking at any information available on competitors.
Another means of collecting competitive information utilizes mystery shoppers.
According to Porter, organizations must consider the strength and impact the following could have:
Substitute products
Potential entrants in the marketplace
The bargaining power of suppliers
The bargaining power of buyers
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THE POLITICAL AND LEGAL ENVIRONMENT
All organizations must comply with government regulations and understand the political and legal environments in which they do business.
Different government agencies enforce regulations that have been established to protect both consumers and businesses.
For example, the Sherman Act (1890) prohibits U.S. firms from restraining trade by creating monopolies and cartels.
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THE ECONOMIC ENVIRONMENT
Economic factors include variables such as:
Inflation
Unemployment
Interest rates
Whether the economy is in a growth period or a recession
Inflation occurs when the cost of living continues to rise and erodes the purchasing power of money.
During a recession, it is possible for both high-end and low-end products to sell well.
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THE DEMOGRAPHIC, SOCIAL, AND CULTURAL ENVIRONMENTS
The demographic and social and cultural environments are constantly changing the global marketplace. They include:
Social trends (such as people’s attitudes toward fitness and nutrition)
Demographic characteristics (such as people’s age, income, marital status, education, and occupation)
Culture, which relates to people’s beliefs and values)
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TECHNOLOGY
Technology changes the way people communicate and the way companies do business.
Marketers increasingly use online ads and mobile marketing.
Organizations must adapt to new technologies to succeed.
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NATURAL RESOURCES
Natural resources are scarce commodities.
Consumers are becoming increasingly aware of this fact.
Green marketing involves marketing environmentally safe products and services.
The marketing is done in a way that is good for the environment.
Green marketing not only helps the environment but also saves the company money.
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THE MISSION STATEMENT
The firm’s mission statement states:
The purpose of the organization
Why it exists.
Both profit and nonprofit organizations have mission statements.
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KEY TAKEAWAYS
A firm must analyze factors in the external and internal environments it faces throughout the strategic planning process. These factors are inputs to the planning process.
As they change, the company must be prepared to adjust its plans.
Different factors are relevant for different companies.
Once a company has analyzed its internal and external environments, managers can begin to decide which strategies are best, given the firm’s mission statement.
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LEARNING OBJECTIVES
Explain how companies develop the objectives driving their strategies.
Describe the different types of product strategies and market entry strategies that companies pursue.
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DEVELOPING OBJECTIVES
Objectives are what organizations want to accomplish in a given time frame.
Objectives should be realistic and measurable.
Objectives help guide and motivate a company’s employees and give its managers reference points for evaluating marketing actions.
A firm’s marketing objectives should be consistent with the company’s objectives at other levels, such as corporate and business.
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FORMULATING STRATEGIES
Strategies are what a firm is going to do to achieve its objectives.
Tactics include specific actions taken to execute the strategy, such as:
Coupons
Television commercials
Banner Ads
Firms often use multiple strategies to accomplish their objectives and capitalize on marketing opportunities.
A marketing plan is a strategic plan that provides a firm’s marketing group with direction.
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MARKETING PLAN
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WHICH PRODUCTS WILL BE CREATED
HOW THE PRODUCTS WILL BE EXCHANGED FOR REVENUE
HOW THE PRODUCTS WILL BE COMMUNICATED
HOW THE PRODUCTS WILL BE DELIVERED
SUPPORTING RESEARCH AND FORECASTS
PRODUCT AND MARKET ENTRY STRATEGIES
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STRATEGIC CHOICES
There are different types of product and market-entry strategies that a firm can pursue in order to meet objectives.
Other choices include:
Licensing
Franchising
Contract manufacturing
Joint ventures
Direct investment
Diversification strategies
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Market Penetration
Product Development
Market Development
TYPES OF PRODUCT AND MARKET ENTRY STRATEGIES
Market penetration strategies:
Increasing a firm’s sales of its existing products to its existing customers.
Product development strategies:
Creating new products for existing customers.
Market development strategies:
Entering new markets with existing products.
Firms can simply export, or sell their products to buyers abroad
The least risky and least expensive method
Also offers the least amount of control
Firms can also license some aspect of their production processes, trademarks, or patents to individuals or firms in foreign markets.
Franchising is a longer-term and thus riskier form of licensing.
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TYPES OF PRODUCT AND MARKET ENTRY STRATEGIES
Contract manufacturing allows companies to hire manufacturers to produce their products in another country.
Joint ventures combine the expertise and investments of two companies and help companies enter foreign markets.
Direct investment provides the most control but also has the most risk.
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MARKET ENTRY METHODS
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DIVERSIFICATION STRATEGIES
Diversification strategies involve:
Entering new markets with new products
Doing something outside a firm’s current businesses.
Diversification can be profitable, but it can also be risky if a company does not have the expertise or resources it needs.
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KEY TAKEAWAYS
The strategic planning process includes a company’s mission (purpose), objectives (end results desired), and strategies (means).
Sometimes the different SBUs of a firm have different mission statements.
A firm’s objectives should be realistic (achievable) and measurable.
The different product market strategies firms pursue include market penetration, product development, market development, and diversification.
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LEARNING OBJECTIVES
Identify the different levels at which strategic planning may occur within firms.
Understand how strategic planning that occurs at multiple levels in an organization helps a company achieve its overall corporate objectives.
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STRATEGIC PLANNING
Corporate-level plans are developed by top executives for the corporation as a whole.
A strategic business unit (SBU) is a business or product line within an organization that has its own competitors, customers, and profit center.
A firm’s SBUs may also have their own mission statement.
Business-level plans are developed by SBUs for themselves.
The different departments (accounting, finance, marketing, and so forth) within a company or SBU might also develop strategic plans.
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STRATEGIC PLANNING LEVELS IN AN ORGANIZATION
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STRATEGIC PLANNING
The strategies and actions implemented at the functional level must help an organization achieve its objectives at both the business and corporate levels.
The SBUs at the business level must also help an organization achieve its corporate-level objectives.
Organizations can utilize multiple methods and strategies at different levels to accomplish their various goals.
Similarly, individuals may use different strategies to accomplish their goals.
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KEY TAKEAWAYS
Strategic planning can occur at different levels (corporate, business, and functional) in an organization.
The number of levels may vary.
If a company has multiple planning levels, the plans must be consistent, and all must help achieve the overall goals of the corporation.
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LEARNING OBJECTIVES
Explain how SBUs are evaluated using the Boston Consulting Group matrix.
Explain how businesses and the attractiveness of industries are evaluated using the General Electric approach.
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PORTFOLIO PLANNING APPROACH
Analyzing a firm’s entire collection of businesses relative to one another.
Two of the most widely used portfolio planning approaches include the:
Boston Consulting Group (BCG) matrix
General Electric (GE) approach
Two popular approaches:
Boston Consulting Group (BCG Matrix)
General Electric business and industry planning model
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THE BOSTON CONSULTING GROUP MATRIX
Helps companies evaluate each of its strategic business units based on two factors:
The SBU’s market growth rate
The SBU’s relative market share
Because the BCG matrix assumes that profitability and market share are highly related, it is a useful approach for making business and investment decisions.
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THE BOSTON CONSULTING GROUP (BCG) MATRIX
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CATEGORIES OF PRODUCTS BASED ON BCG MATRIX
Star: A product with high growth and a high market share.
Cash cow: A product with low growth and a high market share.
Question marks or problem children: Products with a low share of a high-growth market.
Dog: A product with low growth and a low market share.
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THE GENERAL ELECTRIC APPROACH
Examines a business’s strengths and the attractiveness of the industry in which it competes.
Companies evaluate their strengths and the attractiveness of industries as high, medium, and low.
Companies with a medium rating on industry attractiveness and business strengths should be cautious when investing and attempt to hold the market share they have.
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THE GENERAL ELECTRIC APPROACH
Evaluate SBU’s on the following factors:
Market share
Growth of the SBU
Size of the opportunity
Potential for profit
Environmental factors
Competitive conditions
Green: invest for growth
Yellow: status quo
Red: divest
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KEY TAKEAWAYS
A group of businesses is called a portfolio.
Organizations that have multiple business units must decide how to allocate resources to them and decide what objectives and strategies are feasible for them.
Portfolio planning approaches help firms analyze the businesses relative to each other.
The BCG and GE approaches are two of the most common portfolio planning methods.
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