Chapter 1: Foundations of Strategic Marketing Management

1. Plans are nothing, planning is everything. - Dwight D. Eisenhower 2. Plans are the outcome of planning. In order to come up with a plan go the stages. Plans are the result of thinking, researching, strategizing, and reaching conclusions about how to pursue opportunities. 3. Even if you are on the right track, youll get run over if you just sit there. - Will Rodgers 4. If you dont know where you are going, you might end up somewhere else. - Casey Stenge 5. a. Every battle is won before it is fought- Sun Tzu.Commodity thinking b. Avoid looking in the wrong place 6. The Primary Purpose of Marketing-To create long-term and mutually beneficial exchange relationships between an entity and the publics (individuals and organizations) with which it interacts. 7. Expanding Responsibilities of Marketing Managers: Marketing mangers not only direct day-to-day operations but also make strategic decisions. Expanded responsibilities include: - Charting the direction of the organization - Contributing to decisions that will create and sustain a CA and affect LT performance 8. Evolution of the Marketing Manager From being only an implementer.to being a maker of strategy in organization.

This has prompted (a) The creation of CMO positions (b)The increased popularity of strategic marketing management as a course of study and practice (c) Half of fortune 1000 companies have CMOs

9. Responsibilities of CMOs - Define the business mission

- Analyze environmental, competitive, and business situations - Develop business objectives and goals - Define customer value propositions and their marketing strategies

10. Skill Set of CMOs - Analytic abilities: Extensive market and operational information - Intuitive sense: Customer and competitor motivations - Creativity: Framing strategic marketing initiatives

11. Processes in Strategic Marketing Management

1. Define the organizations business, mission, and goals 2. Identify and frame organizational growth opportunities 3. Formulate product-market strategies 4. Budget marketing, financial, and production resources 5. Develop reformulation and recovery strategies

12. Process One: Defining the Organizations Business, Mission, and Goals

13. Business Definition Outlines the scope of operations Not easy to determine what business an organization is in because .. By defining a business from a customer or market perspective, an organization is appropriately viewed as: a customer-satisfying not endeavor a product-producing or service delivery enterprise.

14. What business are we in? An organization should define a business by:

- The type of customers it wishes to serve - The particular needs of those customer groups it wishes to satisfy - The means or technology used to satisfy the customer needs

15. Business Mission Consists of a written statement that: - Underscores the scope of an organizations operations - Reflects managements vision of the organization - Describes an organizations purpose with reference to its customers, offerings.. - Crystallizes the organizations LT direction and character - Helps identify and evaluate product-market opportunities - Inspires employees - Provides direction for goal-setting

16. Business Goals or Objectives - Convert the mission into tangible actions and results to be achieved in a specified time frame - Are divided into three categories: Production Objectives Financial Objectives Marketing Objectives

17. Business Goals or Objectives

18. Business Goals or Objectives

Goal setting should be problem-centered and future-oriented - Managers make a situation analysisan appraisal of operations-- to determine reasons for the gap between: - what was (is) expected and what has happened (will happen).

19. Process Two: Identifying and Framing Organizational Growth Opportunities 20. Converting Environmental Opportunities into Organizational Opportunities ASK THREE QUESTIONS: - What might we do? - What do we do best? - What must we do? Environmental Opportunities Distinctive Competencies Success Requirements

21. What Might We Do? Sources of Environmental Opportunities - Unmet or changing customer needs - Unsatisfied buyer groups - New means or technology for delivering value to prospective buyers The mere presence of an environmental opportunity does not mean that an organizational growth opportunity exists

22. What we do best Distinctive Competency: Describes an organizations unique strengths or qualities including: - Skills (two criteria must be satisfied)

- Technologies - Resources that distinguish it from other organizations.

23. What Do We Do Best? Success Requirements: The basic tasks an organization must perform in a market or industry to compete successfully. - If what must be done is inconsistent with what can be done to capitalize on an environmental opportunity, an organizational growth opportunity will fail to materialize.

24. SWOT Analysis: A formal framework for identifying and framing organizational growth opportunities

25. SWOT Analysis

Framework focuses on the fact that an organizational growth opportunity results from a good FIT..between an organizations INTERNAL CAPABILITIES (Strengths & Weaknesses) and its EXTERNAL ENVIRONMENT (Opportunities & Threats).

26. SWOT Analysis Strength: What the organization is good at doing or a characteristic that gives it an important capability Weakness: What an organization lacks or does poorly relative to competitors Opportunities: Developments or conditions in the environment that have favorable implications for the organization Threats: Pose dangers to the welfare of the organization

27. Exhibit 1.1: Sample SWOT Analysis

28. Questions to be asked once SWOT has been identified 1. Which internal strengths represent distinctive competencies? 2. Which internal weaknesses disqualify the organization from pursuing certain opportunities? 3. Does a pattern emerge from the SWOT?

29. Process Three: Formulating Product-Market Strategies 30. Product-Market Strategies This involves selecting specific markets and profitably reaching them through an integrated program called a marketing mix. This consists of plans for matching an organizations existing or potential offerings with the needs of markets.

31. Product-Market Strategies

32. Market Penetration Strategy Seeking a larger market share in a market in which organization already has an offering This strategy: - Attempts to increase present buyers usage or consumption rates of the offering - Attracts buyers of competing offerings - Stimulates product trial among potential consumers

33. Market Penetration Strategy Factors to consider: - Examine market growth - Assess competitive reaction - Analyze the market potential in terms of usage/consumption rates and new buyers

34. Market Development Strategy Introducing existing offerings to new markets Reaching new markets requires: - Carefully considering competitor S/W and retaliation potential - Adjusting marketing mix such as: Modification of the basic offering Different distribution outlets Change in sales effort and advertising - Identifying the number, motivation, and buying patterns of new buyers - Determining the organizations ability to adapt to new markets to evaluate success

35. Market Development Strategies in International Forms Exporting Licensing

Joint Venture/ Strategic Alliance Direct Investment

36. Market Development Strategies in International Forms Exporting: Involves marketing the same offering in another country through sales offices or intermediaries - Is a popular option for entering foreign markets because it: Easy to initiate Requires minimal capital investment

37. Market Development Strategies in International Forms Licensing: Is a contract where a licensee is given the rights to patents, trademarks, etc. by the licensor in turn for a royalty or fee` - Is a low-risk, quick, and capital-free entry into a foreign market - Limits the control of the licensor over production and marketing by the licensee

38. Market Development Strategies in International Forms Joint Venture/Strategic Alliance: Creates a new entity in the host country from an investment by both a foreign and a local company and profits of the entity, control, - Is popular because one firm may not have the required resources to enter a market - Ensures against trade barriers - May cause disagreements between the partners regarding how the new entity should be run

39. Market Development Strategies in International Forms Direct Investment: Involves investing in a manufacturing and/or assembly facility in a foreign market commitment

- Brings the firm closer to its customers - May be the most profitable market-entry option - Often follows the other three options

40. Product Development Strategy Creating new offerings for existing markets. - Product Innovation--develop totally new offerings - Product Augmentation--enhance the value to customers of existing offerings through bundling or improving functional performance - Product line extension--adding different features, sizes to broaden the existing line

41. Product Development Strategy Factors to consider for this strategy: - The market size and volume needed for profitability - The magnitude and timing of competitors responses - The impact of the new product on the sales of existing offerings (cannibalism) - The capacity of the organization to deliver the offerings - The presence of significant PoDs

42. Product Development Strategy

Cannibalism:

-Occurs when sales of a new offering come at the expense of sales of existing offerings the firm already markets

-Is common in product development programs

- Key issue: Does the new offering detract from the overall profitability of the firm s total offering mix

43. Diversification Strategy Development or acquisition of offerings new to the organization and customers - Many firms have adopted this strategy to take advantage - High-risk strategy because the offering and market served are new to the organization - Can be successful if the organization applies its distinctive competencies to reaching new markets with new offerings

44. Growth Strategy of Starbucks

Starbucks has designed an ambitious, multi-pronged growth strategy to maintain its phenomenal growth

45. Growth Strategy of Starbucks

46. Product-Market Strategy Selection Strategies must have consistency with: - The organizations business definition, mission, and capabilities - Market capacity and behavior - Environmental factors - Competitive activities

47. Product-Market Strategy Selection Strategy analysis depends on: - Availability and evaluation of relevant market information which includes: Market size Consumer buying behavior and requirements Environmental forces

48. Product-Market Strategy Selection Strategies are chosen based on: - Costs and benefits of alternative strategies - Probabilities of success for a strategy - Competitive structure, market dynamics, and opportunity costs - The offering itself

49. EXHIBIT 1.3: DECISION-TREE FORMAT

50. The Marketing Mix and Customer Value Proposition

- Formulating the Marketing Mix

- Implementing the Marketing Mix

51. The Marketing Mix and Customer Value Proposition (CVP) Marketing mix is some controllable activities available to marketers - Conveys a clear CVP - Matches between offerings and markets CVP is a cluster of benefits that an organization promises customers to satisfy their needs. Example: Wal-Marts CVP is EDLPs for a broad range of goods.

52. The Marketing Mix and Customer Value Proposition Formulating the Marketing Mix - The RIGHTNESS of marketing mix depends on the success requirements of market served - Marketing mix must be consistent with Requirements of market The organizations capacity Marketing mix activities

53. The Marketing Mix and Customer Value Proposition: Implementing the Marketing Mix - Implementing of the marketing mix is as much an art as a science - Successful implementation requires an understanding of: Markets Environmental forces

 Organizational capacity Competitor reactions.

54. Process Four: Budgeting Marketing, Financial, and Production Resources

55. The Budget A formal, quantitative expression of an organizations planning and strategy initiatives expressed in financial terms A well-prepared budget meshes and balances an organizations . - Financial, - Production, and _ Marketing Resources ..so that overall organizational goals or objectives are attained.

56. Components of a Budget A master budget consists of: Operating Budget- Focuses on the income statement. Also referred to as a pro forma income statement or profit plan. Financial Budget- Focuses on the effect the operating budget has on the organizations cash position. Special Budgets- Focuses on developing advertising, sales, and other budgets that support the master budget.

57. Process Five: Developing Reformulation and Recovery Strategies

58. The Marketing Audit

A Marketing Audit is a comprehensive, systematic, independent, and periodic examination of a companys marketing environment, objectives, strategies, and activities to recommend a plan of action to improve the companys marketing performance.

59. The Marketing Audit Addresses the following QUESTIONS: Strategic: Are we doing the right things? Operational: Are we doing things right?

60. Reformulation and Recovery Strategies Serve two purposes: -Forces marketing managers to ask What if?questions - Allows managers to preplan of reformulation and recovery strategies in implementing remedial actions

61. The Marketing Plan A formal written document that - describes the context and scope of an organizations marketing effort - to achieve defined goals or objectives - Within a specified time period.

62. The Marketing Plan

Consists of:

63. Marketing Ethics and Social Responsibility - Most marketing decisions involve some degree of moral judgment - Marketers should take actions that are legal, ethical, and socially responsible Their actions will be judged publicly by others with different values

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