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A strategy is a theory about how to gain competitive advantages. A good strategy is a strategy that actually generates such advantages. Strategic management is the process of specifying an organizations objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans.
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Strategic Goals/Plans Senior Management (Organization as a whole) Tactical Goals/Plans Middle Management (Major divisions, functions)
Internal Message Legitimacy, motivation, guides, rationale, standards
Tactical
Product features Promotion Merchandising Pricing Sales channels Service
Developing Marketing Strategies and Plan Part 4: Product Planning: the Nature and Contents of a Marketing Plan 1) Contents of the Marketing Plan
Nike
Critics of Nike often complain that its shoes cost almost nothing to make yet cost the consumer so much. True, the raw materials and manufacturing costs involved in the making of a sneaker are relatively cheap, but marketing the product to the consumer is expensive. Materials, labor, shipping, equipment, import duties, and suppliers' costs generally total less than $25 a pair. Compensating its sales team, its distributors, its administration, and its endorsers, as well as paying for advertising and R&D, adds $15 or so to the total. Nike sells its product to retailers to make a profit of $7. The retailer therefore pays roughly $47 to put a pair of Nikes on the shelf. When the retailer's overhead (typically $30 covering personnel, lease, and equipment) is factored in along with a $10 profit, the shoe costs the consumer over $80.
Encyclopedia Britannica http://corporate.britannica.com The Encyclopdia Britannica was born in 18th-century Scotland amid the great intellectual ferment known as the Scottish Enlightenment. According to one chronicler of Britannica history, Edinburgh in the mid-1700s was "a city on the verge of a golden age, a center of learning and a home of writers, thinkers, and philosophers. The first edition of the Britannica was published one section at a time, over a three-year period, beginning in 1768. In 1990 Encyclopdia Britannica found itself in a precarious competitive environment. CDROMs and the internet had become the study tools of choice for students and others. Microsofts Encarta CD-ROM and IBMs CD-ROM joint venture World Book were attracting Britannicas customers. The result book sales fell 83% between 1990-1997. In 1994 the company developed Britannica Online, the first encyclopedia for the Internet, which made the entire text of the Encyclopdia Britannica available worldwide. That year the first version of the Britannica on CD-ROM was also published. According to a company official: were reinventing our business. We are not in the book business. Were in the information business. By the 2006, the company had become a premier information site on the internet (200,000) subscribers and (150,000) web sites selected
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Part 1: Marketing Value and Customer Value The value delivery process
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Part 1: Marketing Value and Customer Value The value delivery process
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Part 1: Marketing Value and Customer Value The value delivery process
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4) The customer relationship management process. 5) The fulfillment management process. All the activities
involved in receiving and approving orders, shipping the goods on time, and collecting payment.
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3) Core Competencies
To carry out its core business processes, a company needs resourceslabor power, materials, machines, information, and energy. Traditionally, companies owned and controlled most of the resources that entered their businesses, but this situation is changing. Many companies today outsource less critical resources if they can be obtained at better quality or lower cost. Frequently, outsourced resources include cleaning services, landscaping, and auto fleet management. Kodak even turned over the management of its data processing department to IBM. 1-23
VALUE EXPLORATION
VALUE EXPLORATION Because value flows within and across markets that are themselves dynamic and competitive, companies need a well-defined strategy for value exploration. Developing such a strategy requires an understanding of the relationships and interactions among three spaces: (1) the customer's cognitive space; (2) the company's competence space; and (3) the collaborator's resource space. The customer's cognitive space reflects existing and latent needs and includes dimensions such as the need for participation, stability, freedom, and change
VALUE CREATION
To exploit a value opportunity, the company needs valuecreation skills. Marketers need to: 1) identify new customer benefits from the customer's view; 2) utilize core competencies from its business domain; and 3) select and manage business partners from its collaborative networks. To craft new customer benefits, marketers must understand what the customer thinks about, wants, does, and worries about. Marketers must also observe who customers admire, who they interact with, and who influences them
VALUE DELIVERY Delivering value often means substantial investment in infrastructure and capabilities. The company must become proficient at customer relationship management, internal resource management, and business partnership management. Customer relationship management fallows the company to discover who its customers are, how they behave, and what they need or want. It also enables the company to respond appropriately, coherently, and quickly to different customer opportunities.
1) 2) 3) 4)
Defining the corporate mission Defining the business Assessing growth opportunities Organization and organizational culture
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To understand marketing management, we must understand strategic planning. Most large companies consist of four organizational levels: 1) the corporate level, 2) the division level, 3) the business unit level, and 4) the product level.
A marketing plan is the central instrument for directing and coordinating the marketing effort. It operates at a strategic and tactical level.
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1)
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Corporate Mission
This seeks to embody the entire goals of the organization and the objective of its existence. It seeks to provide a sense of purpose, direction and opportunity
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Organizations develop mission statements to share with managers, employees, and (in many cases) customers.
A clear, thoughtful mission statement provides employees with a shared sense of purpose, direction, and opportunity. The statement guides geographically dispersed employees to work independently and yet collectively toward realizing the organization's goals.
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Good mission Statements Mission statements are at their best when they reflect a vision, an almost "impossible dream" that provides a direction for the company for the next 10 to 20 years. Fred Smith wanted to deliver mail anywhere in the United States before 10:30 A.M. the next day, so he created FedEx.
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Rubbermaid Commercial Products, Inc. Our vision is to be the Global Market Share
Leader in each of the markets we serve. We will earn this leadership position by providing to our distributor and end-user customers innovative, high-quality, costeffective and environmentally responsible products. We will add value to these products by providing legendary customer service through our Uncompromising Commitment to Customer Satisfaction.
eBay
We help people trade anything on earth. We will continue to enhance the online trading experiences of allcollectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.
2. stress the company's major policies and values. 3. define the major competitive spheres within which the company will operate
Companies often define their businesses in terms of products: They are in the "auto business" or the "clothing business."
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Product Orientation vs. Market Orientation Company
Missouri-Pacific Railroad Xerox Standard Oil Columbia Pictures
Product
We run a railroad We make copying equipment We sell gasoline We make movies
Market
We are a peopleand-goods mover We improve office productivity We supply energy We entertain people
Strategic Business Units The purpose of identifying the company's strategic business units is to develop separate strategies and assign appropriate funding.
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SBU has three characteristics: 1. It is a single business or collection of related businesses that can be planned separately from the rest of the company. 2. It has its own set of competitors. 3.It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit.
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1. 2. 3. 4.
INTENSIVE GROWTH Integrative Growth Diversification Growth Downsizing and Divesting Older Business
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Four market-product strategies: alternative ways to expand sales revenues for Ben & Jerrys
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Success Probability for each of the 4 basic strategies: Diversification strategy 1 in 20 Market-development Strategy is 1 in 4 Product-development strategy 50-50 Market-penetration is the highest
Developing a strategic fit between organizational goals and capabilities, and changing marketing opportunities
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Planning Phase Situation Analysis This is a complete analysis of the firms situation which assesses internal strengths and weaknesses and external threats and opportunities (SWOT) Internal analysis (controllable factors) assess the firm itself to identify strengths and weaknesses External analysis (uncontrollable factors) assess the firms external environment to identify opportunities and threats
Implementation Phase
Process of putting the marketing plan into action. Involves great attention to detail
Evaluation
Involves measuring the results of the actions from the implementation phase and comparing them with goals set in the planning phase. sales analysis market share analysis expense to sales analysis
SBU
Establishing Strategic Business Units A business can be defined in terms of three dimensions: customer groups, customer needs, and technology.
It is a company within a company The business is differentiated from the rest of the company It has its own set of competitors It is a separate profit centre
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SWOT Analysis
Strengths Weaknesses Opportunities Threats
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The Mission
Mission; the organizations reason for existing. Mission Statement;
states the basic business scope and operations may include the market and customers some may describe company values, product quality, attitudes toward employees
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Corporate Headquarters Planning Activities Define the corporate mission Establish strategic business units (SBUs) Assign resources to each SBU Assess growth opportunities
Characteristics of SBUs
It is a single business or collection of related businesses It has its own set of competitors It has a leader responsible for strategic planning and profitability
Ansoffs Product-Market Expansion Grid Market penetration strategy Market development strategy Product development strategy Diversification strategy
New Mkts
Diversification strategy
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Marketing Control
Annual Plan control Profitability control Strategic Control
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SWOT Analysis
Strengths Weaknesses Opportunities Threats
Goal Formulation
Once the company has performed a SWOT analysis, it can proceed to develop specific goals for the planning period.
Units objectives must be hierarchical Objectives should be quantitative Goals should be realistic Objectives must be consistent
Strategic Formulation
1) Porters Generic Strategies
Overall cost leadership Differentiation Focus
2) Strategic Alliances There are four forms of MDS. 1) Exporting 2) Licensing 3) Joint Venture 4) Direct Investment
Is the plan simple? Is the plan specific? Is the plan realistic? Is the plan complete?