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Chapter 2: Strategic Planning

for Competitive Advantage


Objectives:
1. Understand the importance of strategic
marketing and know a basic outline for a
marketing plan.

2. Develop an appropriate business mission


statement.

3. Describe the criteria for stating good


marketing objectives.

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Chapter 2: Objectives
(cont’d)
4. Explain the components of a situation
analysis.

5. Identify sources of competitive advantage.

6. Identify strategic alternatives and describe


tools used to help select alternatives.

7. Discuss target market strategies.

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Chapter 2: Objectives
(cont’d)
8. Describe elements of the marketing mix.

9. Explain why implementation, evaluation, and


control of the marketing plan are
necessary.

10. Identify several techniques that help make


strategic planning possible.

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1 Strategic Planning
http://www.coke.com
http://www.coke.com
http://www.pepsi.com
http://www.pepsi.com

The managerial process of


creating and maintaining a fit
between the organization’s
objectives and resources and
evolving market opportunities.

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1 Strategic Planning

LONG RUN
EVOLVING PROFITABILITY
MARKET AND GROWTH
OPPORTUNITIES

RESOURCES
&
OBJECTIVES

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1 Strategic Planning

●● What
What is
is the
the organization’s
organization’s main
main activity?
activity?

●● How
How will
will itit reach
reach its
its goals?
goals?

The
The Marketing
Marketing Plan
Plan

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1 Strategic Planning

The process of anticipating


future events and determining
strategies to achieve
organizational objectives in the
future.

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1 The Marketing Plan

A written document that acts


as a guidebook of marketing
activities for the marketing
manager.

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1
Why Write a Marketing
Plan?
● Provides a basis for comparison of actual and
expected performance

● Provides clearly stated activities to work


toward common goals

● Serves as a reference for the


success of future activities t i n g
rke n
Ma Pla
● Allows entry into the
Marketplace with awareness
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Marketing Plan
1 Business Mission

Process
Statement

Objectives

Situation or SWOT
Analysis

http://www.dmusic.com
http://www.dmusic.com
Marketing Strategy

Target Market
Strategy

Marketing Mix
Distribution
Product
(Place)
Promotion Price

Implementation
Evaluation
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2
Defining the Business
Mission
http://www.att.com
http://www.att.com

● Answers the question,


“What business are we in
and where are we going?”

● Focuses on the market(s)


rather than the good or service

● Strategic Business Units may


also have a mission statement
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2
PepsiCo’s Mission
Statement
“PepsiCo’s overall mission is to increase the value of our
shareholders’ investment. We do this through sales growth,
cost controls and wise investment of resources. We believe
our commercial success depends upon offering quality and
value to our consumers and customers; providing products that
are safe, wholesome, economically efficient and
environmentally sound; and providing a fair return to our
investors while adhering to the highest standards of integrity.”

http:\\www.pepsico.com

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2
Strategic Business Units
(SBUs)

Characteristics
Characteristics

1. A distinct mission and specific target market


2. Control over their resources
3. Their own competitors
4. Plans independent of other SBUs

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3 Marketing Objective

A statement of what is to be
accomplished through
marketing activities.

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3 Marketing Objectives
Marketing
Marketing Objectives
ObjectivesMust
Must Be:
Be:

● Realistic
“Our objective is to
increase market share
● Measurable by 40% and to obtain
customer satisfaction
● Time specific ratings of at least 90%
in 2003.”

● Consistent with
Organization’s
Priorities
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3
Examples of
Marketing Objectives

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3 Marketing Plan Objectives

● Communicate marketing
management philosophies

● Provide direction

● Serve as motivators

● Clarify thinking

● Provide basis for control


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4 SWOT Analysis

Identifying
internal strengths (S)
and weaknesses (W)
and also examining
external opportunities (O) and
threats (T)

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4 SWOT Analysis

nal
S Things
Things the
the company
company does
does well.
well.

t er
I n
W Things
Things the
the company
company does
does not
not do
do well.
well.

a l
O Conditions
Conditions in
that
that favor
in the
the external
favor strengths.
strengths.
external environment
environment

te rn
Ex Conditions
Conditions in in the
the external
external environment
T
environment
that
that do
do not
not relate
relate toto existing
existing strengths
strengths
or
or favor
favor areas of
of current
areasCollege
©South-Western current weakness.
Publishing weakness.
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4 SWOT Analysis

Strengths
● Production Costs
Strengths
and
and ● Marketing Skills
Weaknesses
Weaknesses
(INTERNAL)
(INTERNAL) ● Employee Capabilities
● Financial Resources
● Available Technology
● Company/Brand Image
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4 SWOT Analysis

●Social
Opportunities
Opportunities
And
And ●Demographic
Threats
Threats
●Economic
EXTERNAL
EXTERNAL
●Technological

●Political/Legal

●Competitive

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4 Environmental Scanning

Collection and interpretation of


information about forces, events
and relationships in the external
environment that may affect the
future of the organization or the
marketing plan implementation.

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4 Environmental Scanning
● Examination of macroenvironmental forces
−Social
−Demographic
−Economic
−Technological
−Political/Legal
−Competitive

● Helps identify market


opportunities

● Provides guidelines for


design of marketing strategy
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5 Competitive Advantage

The set of unique features of


a company and its products that
are perceived by the target
market as significant and superior
to the competition.

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5 Competitive Advantage
http://www.travelocity.com
http://www.travelocity.com

Cost
Cost

Types
Types of
of Product/Service
Product/Service
Competitive
Competitive Differentiation
Differentiation
Advantage
Advantage

Niche
Niche Strategies
Strategies

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5
Cost Competitive
Advantage

Being the low-cost competitor in


an industry while maintaining
satisfactory
profit margins.

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5
Cost Competitive
Advantage

●● Obtain
Obtain inexpensive
inexpensive raw
raw materials
materials
●● Create
Create efficient
efficient operations
operations
●● Design
Design products
products for
for manufacture
manufacture
●● Control
Control overhead
overhead costs
costs
●● Avoid
Avoid marginal
marginal customers
customers

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5 Sources of Cost Reduction

Experience
Experience Curves
Curves Product
Product Design
Design

Efficient
Efficient Labor
Labor Reengineering
Reengineering

No-frills
No-frills Products
Products Production
Production Innovations
Innovations

Government
Government Subsidies
Subsidies New
New Delivery
Delivery Methods
Methods

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5
Product/Service
Differentiation

Advantage achieved when a


firm provides something that
is unique and valuable to
buyers beyond simply
offering a lower price
than the competition.

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Examples of
5 Product/Service
Differentiation
● Brand names
● Strong dealer network
● Product reliability
● Image
● Service

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5
Niche
Competitive Advantage

Advantage achieved when a


firm seeks to target and
effectively serve a small
segment of the market.

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5
Niche
Competitive Advantage
● Used by small companies with
limited resources
● May be used in a limited geographic
market
● Product line may be focused on a specific
product line

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5
Sustainable
Competitive Advantage

An advantage
that cannot be copied
by the competition.

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5
Sources of Sustainable
Competitive Advantage
Patents
Patents
Copyrights
Copyrights
Locations
Locations
Equipment
Equipment
Technology
Technology
Organization’s
Organization’s
Skills Customer
Customer Service
Service
Skills and
and Assets
Assets
Promotion
Promotion
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6 Strategic Alternatives

Market
Market Increase market share among
Penetration
Penetration existing customers

Market
Market Attract new customers to
Development
Development existing products

Product
Product Create new products for
Development
Development present markets

Diversification Introduce new products


Diversification
into new markets

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Strategic Opportunity
6 Matrix (Ansoff’s Growth Model)
http://www.pg.com
http://www.pg.com

Present Product New Product

Present Market Product


Market
Penetration Development

New Market Diversification


Market Development

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6 BCG Portfolio Matrix
MARKET SHARE DOMINANCE
HIGH LOW
MARKET GROWTH RATE

High growth High growth


HIGH

Market leaders Low market share


Require cash Need cash
Large profits Poor profit margins

$$
LOW

Low growth Low growth


High market share Low market share
High cash flow Minimal cash flow
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6
BCG Portfolio Matrix
Example
MARKET SHARE DOMINANCE
HIGH LOW
MARKET GROWTH RATE

Sub- Integrated
HIGH

Notebooks phone/Palm
and Hand-Held devices
Computer PROBLEM
STAR CHILD
Laptop and Mainframe
Personal Computer
LOW

Computers
CASH
COW DOG
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G.E Strategic Planning Model
Business Strength
Strong Average Weak

Industry Attractiveness
High

Medium

Low
Business Strength Index Industry Attractiveness Index
* Market Share * Market size
* Price Competitiveness * Market Growth
* Product Quality * Industry Profit Margin
* Customer Knowledge * Amount of Competition
* Sales Force and Effectiveness * Seasonality
* Geographic Advantage * Cost Structure
* Others * Etc.
6
Strategies for Resource
Allocation
Provide financial resources if SBU (Problem
Build
Build Child) has potential to be a Star.

Preserve market share if SBU is a successful


Hold
Hold Cash Cow. Use cash flow for other SBUs.

Increase short-term cash return.


Harvest
Harvest Appropriate for all SBUs except Stars.

Get rid of SBUs with low shares in


Divest
Divest low-growth markets.

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7 Marketing Strategy

The activities of selecting and


describing one or more target
markets and developing and
maintaining a market mix that will
produce mutually satisfying
exchanges with target markets.

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7 Target Market Strategy

● Segment the market based on


groups with similar
characteristics

● Analyze the market based on


attractiveness of market
segments

● Select one or more target


markets
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7 Target Market Selections

Appeal
Appeal to
to the
the entire
entire market
market
with
with one
one marketing
marketing mix
mix

Concentrate
Concentrate on
on one
one
marketing
marketing segment
segment

Appeal
Appeal to
to multiple
multiple markets
markets
with
with multiple
multiple marketing
marketing mixes
mixes

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7 Target Market Strategy

Develop a marketing mix that will


produce satisfying exchanges with
target markets

Product
Product
Place
Place
Promotion
Promotion
Price
Price

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8
Marketing Mix: The “Four
Ps”

Price
Price

Promotion
Promotion

Place
Place

Product
Product

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8 Product Strategies

● The starting point of the


“4 Ps”

Product
Product ● Includes physical unit,
package, warranty,
service, brand, image,
and value

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8
Distribution (Place)
Strategies

● Product availability where


and when customers
want them.
Place
Place
● Involves all activities from
raw materials to finished
products

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8 Promotion Strategies
http://www.paramount.com
http://www.paramount.com
http://www.warnerbros.com
http://www.warnerbros.com
http://www.universalstudios.com
http://www.universalstudios.com
● Role is to bring about
exchanges with target
markets
Promotion
Promotion
● Includes integration of
personal selling,
advertising, sales
promotion, and public
relations
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8 Pricing Strategies

● The most flexible of the


“4 Ps”
Price
Price
● Price x # Units Sold =
Total Revenue

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9
Following Up the
Marketing Plan
● Implementation

● Evaluation

● Control
● Marketing Audit
−Comprehensive
−Systematic
−Independent
−Periodic

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9 The Marketing Audit

A thorough, systematic, periodic


evaluation of the goals,
strategies, structure, and
performance of the marketing
organization.

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10
Effective Strategic
Planning

Continual
Continual
Attention
Attention
Requirements
Requirements
for
for Effective
Effective Creativity
Creativity
Strategic
Strategic
Planning
Planning
Management
Management
Commitment
Commitment

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©2004 South-Western/Thomson Learning