Chapter 1 Foundations of Strategic Marketing Management

Chapter 1
Foundations of
Strategic Marketing
Management
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
They no longer function solely to direct
day-to-day operations. They must make
strategic decisions as well.
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
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Evolution of the
Marketing Manager
From being only an
implementer….
to being a maker of
organization strategy.
This has prompted the emergence of
strategic marketing management as
a course of study and practice.
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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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Process One
Defining the
Organization’s Business,
Mission, and Goals
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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
not
a product-producing or service
delivery enterprise.
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“What business are we in?”
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
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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
Most statements describe:
the organization’s purpose
customers, products/services,
markets, philosophy, and technology
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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.
Marketing Goals
market share
marketing productivity
sales volume
profit
customer satisfaction
customer value creation
Financial Goals
Focus on return on
investment, return on
sales, profit, cash flow,
and shareholder wealth.
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Process Two
Identifying and Framing
Organizational Growth
Opportunities
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Converting Environmental
Opportunities into
Organizational Opportunities
What might we do?
Sources of environmental opportunity:
Unmet or changing customer needs
Unsatisfied buyer groups
New means or technology for delivering
value to prospective buyers
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Converting Environmental
Opportunities into
Organizational Opportunities
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.
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Converting Environmental
Opportunities into
Organizational Opportunities
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.
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SWOT Analysis
A formal framework for identifying and
framing organizational growth opportunities
Strengths
Weaknesses
Opportunities
internal
external
Threats
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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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SWOT Analysis
Strength
What the organization is good
at doing or a characteristic that
gives it an important capability
Weakness
What an organization lacks or
does poorly relative to
competitors
Opportunities
Developments or conditions in
the environment that have
favorable implications for the
organization
Threats
Pose dangers to the welfare of
the organization
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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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Process Three
Formulating
Product-Market Strategies
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Product-Market Strategies
Existing
products
New
products
Existing
markets
Market
Penetration
Product
Development
New
markets
Market
Development
Diversification
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Market Penetration
Strategy
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
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Market Development
Strategy
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
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Market Development in
the International Arena
Exporting
Licensing
Joint Venture
or Strategic
Alliance
Direct
Investment
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Product Development
Strategy
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.
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Diversification Strategy
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
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Strategy Selection – Sample Decision Tree
Action
Response
Outcome
Aggressive
competition
Estimated profit of
$2 million
Passive
competition
Estimated profit of
$3 million
Market-penetration
strategy
Aggressive
competition
Estimated profit of
$1 million
Passive
competition
Estimated profit of
$4 million
Market-development
strategy
The Marketing Mix
Product
Strategy
Communications
Strategy
Customer
Price
Strategy
Channel
Strategy
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Process Four
Budgeting Marketing,
Financial, and Production
Resources
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The Budget
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.
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Components of a Budget
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
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Process Five
Developing Reformulation
and Recovery Strategies
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The Marketing Audit
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.
Helps answer the questions:
Are we doing the right things?
Are we doing things right?
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The Marketing Plan
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.
Focus can be on a business, product, or
brand
Time Dimension can be short-run
(typically one year) or long-run (multiyear)
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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
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