Chapter 1 Foundations of Strategic Marketing Management

1. Chapter 1 Foundations of Strategic Marketing Management

2. In this chapter, you will learn about… • Defining the Organization’s Business, Mission, and Goals • Business Definition • Business Mission • Business Goals • Identifying and Framing Organizational Growth Opportunities • Converting Environmental Opportunities into Organizational Opportunities • SWOT Analysis

3. In this chapter, you will learn about… • Formulating Product-Market Strategies • Market-Penetration Strategy • Market-Development Strategy • Product-Development Strategy • Diversification • Strategy Selection • The Marketing Mix • Budgeting Marketing, Financial, and Production Resources • Developing Reformulation and Recovery Strategies • Drafting a Marketing Plan • Marketing Ethics and Social Responsibility

4. 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.

5. 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

6. Evolution of the Marketing Manager • From being only an implementer….to being a makeroforganizationstrategy. This has prompted the emergence of strategic marketing management as a course of study and practice.

7. Processes in Strategic Marketing Management • Defining the organization’s business, mission, and goals • Identifying and framing organizational growth opportunities • Formulating product-market strategies • Budgeting marketing, financial, and production resources • Developing reformulation and recovery strategies

8. Process One Defining the Organization’s Business, Mission, and Goals

9. 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.

10. “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

11. 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

12. Benefits of Mission Statements • Crystallizes management’s vision of the organization’s long-term direction and character • Provides guidance in identifying, pursuing, and evaluating market and product opportunities • Inspires and challenges employees to do those things that are valued by the organization and its customers • Provides direction for setting business goals or objectives

13. 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: • Production • Financial • Marketing

14. 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 Goals • market share • marketing productivity • sales volume • profit • customer satisfaction • customer value creation

15. Process Two Identifying and Framing Organizational Growth Opportunities

16. 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

17. 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.

18. 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.

19. Strengths Weaknesses Opportunities Threats internal external SWOT Analysis A formal framework for identifying and framing organizational growth opportunities

20. SWOTAnalysis 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)

21. 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 SWOTAnalysis

22. Questions to be asked once SWOT has been identified • Which internal strengths represent distinctive competencies? Do these strengths compare favorably with what are believed to be market or industry success requirements? • Which internal weaknesses disqualify the organization from pursuing certain opportunities? • Does a pattern emerge from the SWOT?

23. Process Three Formulating Product-Market Strategies

24. Product-Market Strategies Existing products New products Market Penetration Product Development Existing markets Market Development Diversification New markets

25. 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

26. 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

27. Market Development in the International Arena Exporting Licensing Joint Venture or Strategic Alliance Direct Investment

28. 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.

29. 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

30. Action Response Outcome Estimated profit of $2 million Aggressive competition Estimated profit of $3 million Passive competition Estimated profit of $1 million Aggressive competition Estimated profit of $4 million Passive competition Strategy Selection – Sample Decision Tree Market-penetration strategy Market-development strategy

31. Product Strategy Communications Strategy Price Strategy Channel Strategy The Marketing Mix Customer

32. Process Four Budgeting Marketing, Financial, and Production Resources

33. 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.

34. Components of a Budget • Operating Budget • Also referred to as a pro forma Income Statement • Focuses on an organization’s income statement • Financial Budget • Focuses on the effect that the operating budget and other initiatives will have on the organization’s cash position

35. Process Five Developing Reformulation and Recovery Strategies

36. 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?

37. 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 (multi-year)

38. 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