Chapter 1 Foundations of Strategic Marketing Management.
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Transcript of Chapter 1 Foundations of Strategic Marketing Management.
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Chapter 1
Foundations of
Strategic Marketing
Management
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In this chapter, you will learn about…
1. Defining the Organization’s Business, Mission, and
Goals
Business Definition
Business Mission
Business Goals
2. Identifying and Framing Organizational Growth
Opportunities
Converting Environmental Opportunities into
Organizational Opportunities
SWOT Analysis
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In this chapter, you will learn about…
3. Formulating Product-Market Strategies
Market-Penetration Strategy
Market-Development Strategy
Product-Development Strategy
Diversification
Strategy Selection
The Marketing Mix
4. Budgeting Marketing, Financial, and Production
Resources
5. Developing Reformulation and Recovery Strategies
6. Drafting a Marketing Plan
7. Marketing Ethics and Social Responsibility
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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.
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Expanding Responsibilities of Marketing Managers
Expanded responsibilities include:
Charting the direction of the organization
Contributing to decisions that will create and sustain a competitive advantage and affect long-term organizational performance
They no longer function solely to direct day-to-day operations. They must make
strategic decisions as well.
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Evolution of the Marketing Manager
This has prompted the emergence of
strategic marketing management as
a course of study and practice.
From being only an
implementer….
to being a maker of
organization strategy.
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Processes in Strategic Marketing Management
1. Defining the organization’s business, mission, and goals
2. Identifying and framing organizational growth opportunities
3. Formulating product-market strategies
4. Budgeting marketing, financial, and production resources
5. Developing reformulation and recovery strategies
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Defining the
Organization’s Business,
Mission, and Goals
Process One
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Business Definition
By defining a business from a customer or market perspective…
an organization is appropriately viewed as:
a customer - satisfying endeavor
a product-producing or service delivery enterprise.
not
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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 by which the
organization will satisfy the customer
needs
“What business are we in?”
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Most statements describe:
the organization’s purpose
customers, products/services, markets, philosophy, and technology
Business Mission
Underscores the scope of an organization’s operations apparent in its business definition
Reflects management’s vision of what the organization seeks to do
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Benefits of Mission Statements
1. Crystallizes management’s vision of the organization’s long-term direction and character
2. Provides guidance in identifying, pursuing, and evaluating market and product opportunities
3. Inspires and challenges employees to do those things that are valued by the organization and its customers
4. Provides direction for setting business goals or objectives
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Business Goals
Goals or objectives convert the organization’s mission into tangible actions and results that are to be achieved, often within a specified time frame.
Three major categories of goals:
1. Production
2. Financial
3. Marketing
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Production Goals
Apply to the use of manufacturing and service
capacity and to product and service quality.
Financial Goals
Focus on return on investment, return on
sales, profit, cash flow, and shareholder wealth.
Marketing Goalsmarket share
marketing productivitysales volumeprofitcustomer satisfactioncustomer value creation
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Identifying and Framing
Organizational Growth
Opportunities
Process Two
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Sources of environmental opportunity:
Unmet or changing customer needs
Unsatisfied buyer groups
New means or technology for delivering
value to prospective buyers
What might we do?
Converting Environmental Opportunities into
Organizational Opportunities
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What do we do best?
Distinctive Competency describes an
organization’s unique strengths or qualities
including:
Skills
Technologies
Resources
…that distinguish it from other organizations.
Converting Environmental Opportunities into
Organizational Opportunities
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What must we do?
Success Requirements are basic tasks that 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.
Converting Environmental Opportunities into
Organizational Opportunities
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SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
internal
external
A formal framework for identifying and framing organizational growth opportunities
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SWOT Analysis
Framework for focusing attention on the fact that an organizational growth
opportunity results from…
a good fit between an organization’s INTERNAL CAPABILITIES
(Strengths & Weaknesses)
and
its EXTERNAL ENVIRONMENT (Opportunities & Threats)
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Pose dangers to the welfare of the organization
Threats
Developments or conditions in the environment that have favorable implications for the organization
Opportunities
What an organization lacks or does poorly relative to competitors
Weakness
What the organization is good at doing or a characteristic that gives it an important capability
Strength
SWOT Analysis
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Questions to be asked once
SWOT has been identified
1. Which internal strengths represent
distinctive competencies? Do these
strengths compare favorably with what are
believed to be market or industry success
requirements?
2. Which internal weaknesses disqualify the
organization from pursuing certain
opportunities?
3. Does a pattern emerge from the SWOT?
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Formulating
Product-Market Strategies
Process Three
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DiversificationDiversificationMarketDevelopment
MarketDevelopment
MarketPenetration
MarketPenetration
ProductDevelopment
ProductDevelopment
Existingproducts
Newproducts
Existingmarkets
Newmarkets
Product-Market Strategies
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Seeking a larger market share in a market in
which organization already has an offering
This strategy involves:
Attempts to increase present buyer’s usage or consumption rates of the offering
Attracting buyers of competing offerings
Stimulating product trial among potential consumers
Market Penetration Strategy
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Introducing its existing offerings to markets other than those that the organization is
currently serving.
Reaching new markets requires:
Carefully considering competitor strengths and weaknesses and competitor retaliation potential
Modification of the basic offering
Different distribution outlets
Change in sales effort and advertising
Market Development Strategy
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LicensingExporting
Joint Venture or Strategic
Alliance
Direct Investment
Market Development in the International Arena
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Creating new offerings for existing markets.
This approach may be taken for:
Product Innovation – develop totally new offerings
Product Augmentation – enhance the value to customers of existing offerings
Product line extension – broaden the existing line of offerings by adding different sizes, forms, flavors, etc.
Product Development Strategy
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Development or acquisition of offerings new to the organization and introducing those offerings to publics not previously
served by the organization.
Growing trend in recent years
High-risk strategy because both the
offering and market served are new to
the organization
Diversification Strategy
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Market-penetrationstrategy
Market-developmentstrategy
Estimated profit of$1 million
Estimated profit of$4 million
Action Response Outcome
Aggressivecompetition
Passivecompetition
Aggressivecompetition
Passivecompetition
Strategy Selection – Sample Decision Tree
Estimated profit of$2 million
Estimated profit of$3 million
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The Marketing Mix
Customer
ChannelStrategy
ProductStrategy
PriceStrategy
Communications Strategy
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Budgeting Marketing,
Financial, and Production
Resources
Process Four
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A formal, quantitative expression of an organization’s planning and strategy
initiatives expressed in financial terms
A well-prepared budget meshes and balances an organization’s
Financial,
Production, and
Marketing Resources
so that overall organizational goals or objectives are attained.
The Budget
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1. Operating Budget
Also referred to as a pro forma Income Statement
Focuses on an organization’s income statement
2. Financial Budget
Focuses on the effect that the operating budget and other initiatives will have on the organization’s cash position
Components of a Budget
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Developing Reformulation
and Recovery Strategies
Process Five
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Comprehensive, systematic, independent, and
periodic examination of a company’s marketing
environment, objectives, strategies, and
activities to recommend a plan of action to
improve the company’s marketing performance.
The Marketing Audit
Helps answer the questions:
Are we doing the right things?
Are we doing things right?
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Focus can be on a business, product, or
brand
Time Dimension can be short-run
(typically one year) or long-run (multi-
year)
A formal written document that describes the context and scope of an organization’s
marketing effort to achieve defined goals or objectives within a specified future time period.
The Marketing Plan
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Marketing Ethics and Social Responsibility
Marketing decisions reflect an organization’s orientation toward the publics with which it interacts
The marketplace is populated by individuals with diverse value systems
Their actions will be judged publicly by others with different values