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Marketing Management
Chapter 2
Developing Marketing Strategies and Plans

MKTG1100 and MKTG1390

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Marketing and customer
Value
• The value delivery process
• The value chain
• Core competencies
• The central role of strategic planning

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The value delivery
process

Phase 1 Phase 2 Phase 3

Choose the Value Provide the Value Communicate the
Do the homework! Identify features, Value
Use STP prices and Use internet,
distribution advertising, sales
opportunities team, etc. to
announce and
promote the product.

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The Value chain

• Developed by Michael E Porter as a

tool for identifying ways to create
more customer value
– Every firm is a synthesis of activities
performed to design, produce, market,
deliver, and support its product

Image Source: forbes.com

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 The Value chain
Firm Infrastructure
Support Activities

Human Resource Management

Technology

Procurement Margin

Inbound Outbound Marketing

Operations Service
Logistics Logistics & Sales

Primary Activities
Source: Porter, ME, Competitive Advantage. Creating and Sustaining Superior Performance

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Core business processes

• Market-sensing process
• New-offering realization process
• Customer acquisition process
• Customer relationship management process
• Fulfillment management process

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Core competencies
• A source of competitive advantage and makes a
significant contribution to perceived customer benefits
• Applications in a wide variety of markets
• Difficult for competitors to imitate

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Maximizing Core
competencies
• (Re)define the business concept
• (Re)shaping the business scope
• (Re)positioning the company’s brand identity

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Central role of strategic
planning
• Managing the businesses as an investment portfolio
• Assessing the market’s growth rate and the company’s
position in that market
• Establishing a strategy

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Marketing plan
The central instrument for directing and coordinating the
marketing effort
• The strategic marketing plan
lays out the target markets and the firm’s value
proposition, based on an analysis of the best market
opportunities.
• The tactical marketing plan
specifies the marketing tactics, including product
features, promotion, merchandising, pricing, sales
channels, and service.

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Strategic Planning,
Implementation, and Control
Processes

Source: Figure 2.1 Strategic Planning, Implementation, and Control Processes,

Kotler & Keller, (2016) Marketing Management, 15e Global Edition, Pearson Education Limited

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Corporate and division
strategic planning
• Defining the corporate mission
• Establishing strategic business units
• Assigning resources to each strategic business unit
• Assessing growth opportunities

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Defining the corporate
mission
1. What is our business?
2. Who is the customer?
3. What is of value to the customer?
4. What will our business be?
5. What should our business be?

A good mission will craft the direction of a business for 10-

20 years!

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Product Orientation vs. Market
Orientation
Company Product Market

We organize information and

We make search engines
make is universally accessible

We make copying equipment We improve office productivity

We drive advances in knowledge

We fly crafts into around science, technology,
outer space aeronautics and space
exploration

We make movies We market entertainment

Images sourced from corporate websites

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Good Mission statements
• Focus on a limited number of goals
• Stress the company’s major policies and values
• Define the major competitive spheres within which the
company will operate
• Take a long-term view
• Are as short, memorable, and meaningful as possible

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Establishing Strategic
Business Units (SBU)
• A single business or collection of related businesses
• Has its own set of competitors
• Has a leader responsible for strategic planning and
profitability

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Assigning Resources to
Each SBU
• Management must decide how to allocate corporate
resources to each SBU
– Portfolio-planning models
– Shareholder/market value analysis

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 Portfolio Planning Models
• GE / McKinsey Matrix • BCG’s Growth-share
Matrix
High Premium – Selective – Protect /
invest for Invest for Refocus –
growth growth Selectively
invest for
earnings

Market Growth Rate

Market Attractiveness

Challenge – Prime – Restructure –

Invest for Segment the Harvest or
growth market divest

Opportunistic – Opportunistic – Harvest or Divest

Selectively invest Preserve for
for earnings harvest
Relative Market Share
Low
Strong Business Position Weak

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Assessing growth
opportunities

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Assessing growth
opportunities
• Intensive Growth
• Integrative Growth
• Diversification Growth
• Downsizing and Divesting Older Businesses

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Assessing growth
opportunities
Intensive growth
Corporate management should
first review opportunities for
improving existing businesses

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Assessing Growth Opportunities

Intensive growth Products

A useful framework is the

Current
“Product Market Expansion
Market Penetration
Grid” Growth in existing product
markets by
• increasing market share
Current • Market
increasing product usage
• Penetration
increasing the frequency
used
• increasing the quantity used
• finding new applications for
Markets current users
New
Product Development
Create new products by:
• adding new product features,
product refinements
Product
• expanding the product line
Development
• develop a new generation
products
• develop new products in the
same product category for
same market

Market Development Diversification

Growth by targeting new Growth by targeting new
markets markets with new products
• geographic based (combination of product
Market
• customer descriptor based: Diversification
development and market
New Development
demographic, development)
psychographic or
behavioural

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 Assessing growth
opportunities
Integrative Growth
• A business can increase
sales and profits through
backward, forward, or
horizontal integration within
its industry
Definitions:
• Vertical integration: a firm expands into another production stage. Can be forward or backward
• Forward vertical integration: activities that are getting you closer to the customer
• Backward vertical integration: activities that are in the direction of procurement
• Horizontal integration: activities that “pool” the capabilities of two strong firms - usually through
merger or acquisition in order to further strengthen a single firms position in the industry
Source: http://www.strategicmanagementinsight.com/topics/horizontal-integration.html

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Diversification growth

• Diversification growth makes sense when good

opportunities exist outside the present businesses
– The industry is highly attractive and the company has the right mix
of business strengths to succeed

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Downsizing and Divesting
Older Businesses
• Companies must carefully prune, harvest, or divest tired
old businesses to release needed resources for other
uses and reduce costs

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SWOT Analysis

External
environment
(opportunity and
threat analysis)

Business Goal Strategy Program Feedback and

Mission Implementation
formulation formulation formulation Control

Internal
environment
(Strengths /
weakness analysis)

Image Source: Figure 2.4 The Business Unit Strategic-planning Process

Kotler & Keller (2016) Marketing Management, 15e, Pearson Education Limited

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External environment

Opportunity & Threats

• Marketing opportunity: an area of buyer need and
interest that a company has a high probability of
profitably satisfying.
• Three (3) main sources:
1. Offer something that is in short supply
2. Supply an existing service in a new or superior way
3. Offer a totally new product or service

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External environment

Opportunity & Threats

• Environmental threat: challenge posed by an
unfavorable trend or development that, in the absence
of defensive marketing action, would lead to lower sales
or profit

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Market Opportunity Analysis
(MOA)
Questions to ask:
 Can we articulate the benefits convincingly to a defined
target market(s)?
 Can we locate the target market(s) and reach them with
cost-effective media and trade channels?
 Does our company possess or have access to the critical
capabilities and resources we need to deliver the customer
benefits?
 Can we deliver the benefits better than any actual or
potential competitors?
 Will the financial rate of return meet or exceed our required
threshold for investment?

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Opportunity & Threat
Matrices

Image Source: Figure 2.5 Opportunity & Threat Matrices

Kotler & Keller (2016) Marketing Management, 15e, Pearson Education Limited

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Goal formulation

External
environment
(opportunity and
threat analysis)

Business Goal Strategy Program Feedback and

Mission Implementation
formulation formulation formulation Control

Internal
environment
(Strengths /
weakness analysis)

Image Source: Figure 2.4 The Business Unit Strategic-planning Process

Kotler & Keller (2016) Marketing Management, 15e, Pearson Education Limited

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Goal formulation (MBO)

• Unit’s objectives must be arranged hierarchically

• Objectives should be quantitative
• Goals should be realistic
• Objectives must be consistent

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Strategic formulation

External
environment
(opportunity and
threat analysis)

Business Goal Strategy Program Feedback and

Mission Implementation
formulation formulation formulation Control

Internal
environment
(Strengths /
weakness analysis)

Image Source: Figure 2.4 The Business Unit Strategic-planning Process

Kotler & Keller (2016) Marketing Management, 15e, Pearson Education Limited

41
Strategic formulation

What is a Strategy?
A Strategy is a game plan for achieving the goals
• Businesses must design 3 types of strategies
for achieving their goals:
1. Marketing strategy
2. Technology strategy
3. Sourcing strategy

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Strategic formulation

Porter’s Generic Strategies

Three generic strategies
• Overall cost leadership
• Differentiation
• Focus (cost focus; and differentiation focus)

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Strategic formulation
Porter’s Generic Strategies
Competitive Advantage

Product / Service
Low Cost
Uniqueness

Cost
Broad Target Differentiation
Leadership
Target market / Scope

(Industry wide) Strategy

Strategy

Focus
Narrow Target Focus Strategy
(Market Segment) Strategy (Differentiation)
(Low Cost)

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Strategic formulation

Strategic alliances
• Categories of marketing alliances
– Product or service alliance
– Promotional alliance
– Logistics alliances
– Pricing collaborations

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Program Formulation and
Implementation
External
environment
(opportunity and
threat analysis)

Business Goal Strategy Program Feedback and

Mission Implementation
formulation formulation formulation Control

Internal
environment
(Strengths /
weakness analysis)

Image Source: Figure 2.4 The Business Unit Strategic-planning Process

Kotler & Keller (2016) Marketing Management, 15e, Pearson Education Limited

48
Program Formulation and
Implementation
McKinsey’s 7-S Framework
Elements of Success
style

strategy skills

Share
d
value
staff s systems

structur
e Image Source: Adapted from mckinsey.com

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Feedback and control

External
environment
(opportunity and
threat analysis)

Business Goal Strategy Program Feedback and

Mission Implementation
formulation formulation formulation Control

Internal
environment
(Strengths /
weakness analysis)

Image Source: Figure 2.4 The Business Unit Strategic-planning Process

Kotler & Keller (2016) Marketing Management, 15e, Pearson Education Limited

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Feedback and control
It is more important to “do the right
thing”— to be effective — than
“to do things right”— to be efficient”
Peter Drucker

The most successful companies,

excel at both!

Peter Drucker, Educator

(1909 – 2005)
Image Source: cgu.edu

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Marketing Plan Contents

• Executive summary
• Table of contents
• Situation analysis
• Marketing strategy
• Marketing tactics
• Financial projections
• Implementation controls

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Evaluating a Marketing
Plan
• Is the plan simple/succinct?
• Is the plan complete?
• Is the plan specific?
• Is the plan realistic?

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Other marketing plan
contents
• Marketing research
• Specifications for internal and external relationships
• Action plans and schedules

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