MARKETING

Real People, Real Choices

Fourth Edition

CHAPTER 2
Strategic Planning and
the Marketing
Environment:
The Advantage is
Undeniable

Michael R. Solomon Greg W. Marshall Elnora W. Stuart

 Chapter Objectives

• Explain the strategic planning process

• Describe the steps in the marketing planning
process
• Explain operational planning
• Discuss important aspects of an
organization’s internal environment
• Explain why marketers scan an
organization’s external business environment

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 Business Planning

• Business plans
– guide entire
organization or its
business units
– Bplans.com
provides several
examples

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 Marketing Plans

• Describe the marketing environment

• Outline marketing strategies
• Identify plans for implementation and
evaluation

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 Strategic Planning
• Strategic planning is the managerial
decision process that matches the
organization’s resources and capabilities
to its market opportunities for long-term
growth
• Firms may become multi-product
companies with self-contained divisions
– Strategic Business Units (SBUs)
– Example: The Walt Disney Company

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Figure 2.1: Planning at Different Levels

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 Lower Levels of Planning

• Functional • Operational
– Conducted by – Conducted by
mid-level first-line
managers managers
– Includes – Includes day-to-
Marketing as day execution of
well as Finance, tactical plans
Operations,
HRM, etc.

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Operational Planning

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 Strategic Planning Steps

Define the organization’s mission

Evaluate internal/external environments

Set objectives

Establish the business portfolio

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Define the Organization’s Mission

• A mission may begin with these

questions:
– What business are we in?
– What customers should we serve?
– How should we develop the firm’s
capabilities and focus its efforts?

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 Sample Mission Statements

• MADD: To stop drunk driving, support the

victims of this violent crime, and prevent
underage drinking.
• Armour: To find new technology and
enhance the performance of every athlete
and outdoorsman. Lighter. Faster. Stronger.
Better.

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Evaluate the Internal/External Environment

Strengths Weaknesses

Opportunities Threats

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Set Organizational and SBU Objectives

• SBU objectives must support the overall

objectives of the firm

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 Establish the Business Portfolio

• For firms with different SBUs, planning

also includes allocating resources
among the businesses
• Each SBU is a separate profit center
within the larger corporation
• Each SBU is responsible for its own
costs, revenues, and profits

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 Crest

Crest toothpaste
products are part
of P&G’s portfolio
that ranges from
personal care
products to coffee

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Figure 2.2: The Role of SBUs

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 Portfolio Management

• The range of products owned by a large

firm is called a business portfolio
• Portfolio analysis allows a firm to
assess the potential of its products and
businesses
– BCG Growth-Market Share Matrix

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Boston Consulting Group

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Figure 2.3: BCG Matrix

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 BCG Matrix

• Method focuses on the potential of a firm’s

existing successful products to generate
cash that the firm can then use to invest in
new products
• New products are chosen for their potential
to become future cash generators
• Two dimensions:
– Market growth rate
– Relative market share

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 BCG Matrix: Stars

• SBUs with dominant market share in

high-growth markets
– requires funding to keep up with
production and promotion demands
– strategies seek to maximize market
share in the face of increasing
competition

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 BCG Matrix: Cash Cows

• SBUs with dominant market share in a

low-growth potential market
– product is well established and market
share can be maintained with minimal
funding
– firms milk cows of profits to fund growth of
other products in portfolio
– too many cows can become a liability due
to the lack of growth potential

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 BCG Matrix: Question Marks

• SBUs with low market shares in fast-

growth markets
– sometimes called problem children
– the firm has failed to compete effectively
• The dilemma? Investing more money
into the SBU may:
– improve market share in a high potential
market OR
– result in negative cash flow and failure

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 BCG Matrix: Dogs

• SBUs with small market share in a slow-

growth market
– specialized products in limited
markets unlikely to grow
– firms may sell dogs to smaller firms or
eliminate product from market

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 Disney’s Touchstone

Disney
emphasizes
its movie
brand for
grownups as
a star

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 Developing Growth Strategies

• Product-Market Growth Matrix illustrates

different growth strategies
– Two dimensions
• opportunities for growth in existing
or new markets
• allocating resources into existing
products or new products
– Four strategies result

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Figure 2.4: Product-Market Growth Matrix

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Steps in the Marketing Planning Process

1. Perform a situation analysis

2. Set marketing objectives
3. Develop marketing strategies
– Select a target market
– Develop marketing mix strategies
4. Implement marketing strategies
5. Monitor and control strategies

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 Operational Planning

• Day-to-day execution of the marketing

plan
• Performed by first-line supervisors
• Timed over 1-2 months

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 The Internal Business Environment

• Corporate Resources
and Competencies
• Corporate Culture
– Risk-Taking
Cultures
– Profit-Centered
versus People-
Centered Cultures

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 The Economic Environment

• The Business Cycle

– All economies go through cycles of prosperity,
recession, and recovery
– The cycle directly affects marketers because
of its effect on consumer behavior
• The Power of Expectations
– Consumer confidence represents consumer
beliefs about what the future holds
– Like business cycles, it affects whether
consumers buy or cut back on spending

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 Consumer Confidence Index

Source: http://www.conference-board.org/economics/consumerconfidence/index.cfm
posted July 27, 2004

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 The Competitive Environment

• Analyzing the Competition

– Strengths and weaknesses analysis
– Competitive intelligence (CI)
• Competition in the Microenvironment
• Competition in the Macroenvironment

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 Competition: The Microenvironment

• In the microenvironment, competition means the

alternatives from which the target may choose
• Level 1: competition for discretionary income
(for income left after a consumer pays for
necessities)
• Level 2: product competition in which different
products attempt to satisfy the same needs or
wants
• Level 3: brand competition in which competitors
offering similar products compete for consumer
choice

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 Competition: The Macroenvironment

• Overall structure of industry

– monopoly - when one seller controls market
– oligopoly - relatively small number of sellers,
each with a substantial share of market
– monopolistic - many sellers compete for
buyers; each offers a slightly different product
and has a small share of market
– perfect competition - many small sellers each
offering the same product

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 Competition: The Macroenvironment

Share of Market Number of Firms

per Firm: in Market:
High High

Monopoly

Oligopoly

Monopolistic Competition

Perfect Competition
Low Low

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 The Technological Environment

• Technology is an
investment a firm
must make to
succeed
• Patents protect
inventions

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 The Legal Environment

• Regulatory Agencies
– Food and Drug Administration
– Federal Trade Commission
– Federal Communications
Commission
– Interstate Commerce Commission
– Consumer Product Safety
Commission
– Environmental Protection Agency

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 The Sociocultural Environment

• Characteristics of society
• Characteristics of people in that society
• Cultural values and beliefs

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 Issues for Discussion_1

• Do you think the BCG Matrix is a useful

way for organizations to examine their
businesses? What are some examples
of product lines that fit in each
category?
• Do you think planning is essential to a
firm’s success? Can planning ever hurt?
• Can you identify organizations that
should have contracted rather than
expanded?

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 Issues for Discussion_2

• What are some ways that the

technological environment has changed
marketing? What predications might you
make for how technology will change
marketing in the future?
• What are the advantages and
disadvantages of governmental controls
of marketing? What new laws would you
recommend?

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