Chapter 3 Marketing’s Strategic Role in the Organization

1. Chapter 3Marketing’s Strategic Role in the Organization Jason C. H. Chen, Ph.D. Professor School of Business Administration Gonzaga University Spokane, WA 99223 chen@jepson.gonzaga.edu

2. After studying this chapter, you should be able to: • Discuss the three basic levels in an organization and the types of strategic plans developed at each level. • Understand the organizational strategic planning process and the role of marketing in this process. • Describe the key decisions in the development of corporate strategy.

3. After studying this chapter, you should be able to: • Understand the different general business strategies and their relationship to business marketing, product marketing, and international marketing strategies. • Realize the importance of relationships and teamwork in executing strategic plans.

4. OPENING VIGNETTE WWW.DISNEY. COM • What are the four business segments of Disney? • What are the long run objectives of Disney’s? • Can the development of a marketing strategy help Disney? How?

5. develop guide Strategy create Tactic Planning is everything ... Vision Customers, market, competition Products, Services N

6. Business Strategy • Business Decisions • Objectives and Direction • Change IT Planning: The Relationship Between Business, IS,and IT Strategies IT Impact and potential Where is the business going and why Direction for business Supports business IS Strategy What is required • Business Based • Demand Orientated • Application Focused Infrastructure And services Needs and priorities How it can be delivered IT Strategy • Activity Based • Supply Orientated • Technology Focused

7. Focusing Marketing Strategy and Evaluating Market Opportunities Opportunities to be turned Into marketing strategies and plans Evaluating Opportunities Focusing marketing Strategy S.W.O.T Analysis Develop product market Screening criteria Defining generic markets and product-markets Targeting and Segmentation Positioning and Differentiation Company mission, objectives, resources Competitor analysis Trends in external environment: Technological, Economic, Political & Legal Cultural & Social

8. The Business Levelconsists of units within the overall organization that are generally managed as self-contained businesses. The Functional Level includes all the various functional areas within a business unit. Organizational Levels The Corporate Level is the highest level in any organization.

9. I. Organizational Strategic Planning • Higher organizational level strategic plans provide direction for strategic plans at lower levels. • Lower-level plans are developed to execute higher-level plans.

10. Competitive Advantage • Competitive advantage: the firm has a marketing mix that the target market sees as better than a competitor's mix • A better marketing mix offers target customers better customer value • Note: customers who are not in the target market may not see the marketing mix as offering better value • Requires that the firm: • understand current competitors' offerings • anticipate competitors' likely plans • monitor effects of changes in competition • REALLY understand the target customers' needs

11. Shout and Crème Saver ads

12. Product Place Price Promotion C Target Market (Segments, Position) Marketing Mix P P P P Offering to the Market --------Feedback of Results--------- STRATEGY How to cope with a dynamic environment, capitalizing on opportunities and handling threat … How to adopt an integrated system orientation … How to be a market driven organization = STRATEGIC PLANNING. Mission Statement (Marketing Concept Orientation) Company-Wide Level Objectives and Goals Grand Strategy Impact of Competition and other Environmental Items Marketing Strategy and Tactics

13. Types of Strategic Plans (Exhibit 3-1; p.49) Organizational Level Type of Strategic Plan Key Strategic Decisions Corporate Corporate strategic Corporate vision plan Objectives & resource allocation Growth strategies Business Business strategic Market scope plan Competitive advantage Marketing Marketing strategic Target market plan Marketing mix Product marketing Specific target market plan Specific marketing mix Execution action plan

14. Marketing Strategy Planning Process • Narrowing down from broad market opportunities that a firm might pursue to a specific strategy • Marketing strategy specifies a specific target market and a specific marketing mix • Not just “some” strategy, but one that will offer target customers superior value • Segmentation helps pinpoint a specific target market • Differentiation helps pinpoint a marketing mix that is different from and better than what is available from a competitor • Screening criteria make it clear why you select a specific strategy (and why others are “screened out”) • S.W.O.T. analysis identifies and lists a firm’s strengths and weaknesses and its opportunities and threats • S.W.O.T helps identify relevant screening criteria (what is needed to get a competitive advantage)

15. A Marketing Strategy C

16. Marketing Strategy • Marketing strategy can be defined as the firm’s identification of desirable market segments and the development of appropriate marketing mixes to appeal to these segments.

17. A Marketing Strategy – showing the 4 P’s of a Marketing Mix Product Place Price Promotion C

18. Product Place Price Promotion C Overview of Marketing Strategy Planning Process Narrowing down to focused strategy with quantitative and qualitative screening criteria Customers Needs and other Segmenting Dimensions S. W. O. T. Segmentation & Targeting Company Objectives & Resources Segmentation & Positioning Competitors Current & Prospective External Market Environment Technologies Political and Legal Cultural and Social Economic

19. Japanese McDonalds photo

20. Narrowing Down to Target Markets Select target marketing approach Segmenting into possible target markets Narrowing down to specific product-market Single target marketing approach All customer needs Some generic market One broad- product market Homogenous (narrow) product- markets Multiple target marketing approach Combined target marketing approach

21. The Strategic Role of Brand Loyalty Generating Market Share Developing a Strong Customer Base Customer Equity

22. The Learning Process Drive Cues Reinforcement Response

23. The Strategic Planning Process Exhibit 3-2 General Strategic Planning Execute Examine current situation Identify potential threats & opportunities Set objectives Develop strategies See also Appendix A (p. 501)

24. IT Planning: Basic four-stage model TM -24 Dr. Chen,The Trends of the Information Systems Technology

25. The Role of Marketing • 1. Strategic Marketing: • Marketing activities that affect corporate, business, and marketing strategic plans. See also Exhibit 3-3 (p.52)

26. The Role of Marketing (Activities) Marketers orient everyone in the organization toward markets and customers. Marketers analyze the current situation, identify trends in the marketing environment, and assess the potential impact of these trends. • Marketers development corporate, business, • and marketing strategic plans.

27. 2. Marketing Management: Relates to specific product marketing strategies. Develop and execute product marketing plans 3. Networks: Comprise strategic alliances among suppliers, distributors, and the marketing firm. The Role of Marketing (cont.)

28. Marketing Strategy and the Internet • After the failure of many dot com companies • Rewrite the rules of business • Lessons firms should learn • Three basics of business success • Customers • Capabilities • Competitive advantages • Future impact of the Internet

29. Three Ways to Develop Market-Oriented Strategies • Single Target Market Approach • select one homogeneous segment as the target • Multiple Target Market Approach • select two or more target segments • develop a different marketing mix for each segment • Combined Target Market Approach • combine submarkets into a single target market • develop one marketing mix for the combined target © 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Basic Marketing

30. II. Corporate Strategy Decisions • Corporate Vision • Corporate Objectives & Resource Allocation • Corporate Growth Strategies • Business-unit Composition

31. Corporate Vision: The basic values of an organization. The vision specifies what the organization stand for, where it plans to go, and how it plans to get there. Corporate Vision

32. What Comprises Corporate Vision? • Markets • Products and services • Geographic domain • Core competencies • Organizational objectives • Organizational philosophy • Organizational self-concept • Desired public image Exhibit 3-4 (p.54)

33. Core Purpose: A Company’s Reason for Being Exhibit 3-5 (p.54) • 3M:To solve problems innovatively. • Hewlett-Packard:To make technical contributions for the advancement and welfare of humanity. • Mary Kay Cosmetics:To give unlimited opportunity to women. • Merck:To preserve and improve human life. • Sony:To experience the joy of advancing and applying technology for the benefit of the public. • Wal-Mart:To give ordinary folks the chance to buy the same things as rich people.

34. Core Purpose • Core Competency: • A bundle of skills that are possessed by individuals across the organization.

35. Questions Leading to an Effective Corporate Vision Exhibit 3-6 (p.55) • Which customers will you be serving in the future? • Through which channels will you reach customers in the future? • Who will be your competitors in the future? • Where will your margins come from in the future? • In what end-product markets will you participate in the future? • What will be the basis for your competitive advantage in the future? • What skills or capabilities will make you unique in the future?

36. Corporate Objectives and Resource Allocation • Corporate objectives specify the achievement of desired levels of performance during particular time periods.

37. Providing guidance • for the development • and Implementation of • marketing strategies. • 1) In setting the • objectives for different • organizational levels. Corporate Objectives and Resource Allocation Corporate objectives and resource allocation affect marketers in 2 basic ways:

38. Which one is more important Growth and new-customer generation, or Retain existing customer New or Existing Customers • Two important capabilities of successful market-oriented firms • Market sensing capability • Customer-linking capability By George Day, Wharton School of Business

39. Corporate Growth Strategies (Four Basic Types of Opportunities) Products Present New Market Penetration Product Expansion Present Markets Market Expansion Diversification New

40. Examples of Different Types of Opportunities • Market Penetration • Arm & Hammer promotes new uses of its baking soda • Market Development • Marriott Hotels target families for weekend "get-aways" to rent rooms filled by business travelers during the week • Product Development • Microsoft develops a new version of its Windows operating system to appeal to the people who bought an earlier version but now want more features • Diversification • RJR, the cigarette producer, adds baked goods to its product line to appeal to new customers

41. Business-Unit Composition • Strategic Business Unit (SBU): • Focuses on “a single product or brand, a line of products, or mix of related products that meets a common market need or a group or related needs, and the unit’s management is responsible for all (or most) of the basic business functions”

42. Business-Unit Composition • Companies often organize around competency-based SBUs to establish Sustained Competitive Advantage.

43. III. Business Strategy Decisions • The basic objective of a business strategy is to determine how the business unit will compete successfully.

44. Dimensions of Strategy: Market scope. How broadly the business views its target market. Competitive advantage. CompetitiveAdvantage: The way a business tries to get consumers to purchase its products over those offered by competitors. Business Strategy Decisions

45. General Business Strategies Market Scope Focused Broad • Easyjet • Jet Blue • Southwest Low price Competitive Advantage • Conair • Alaskan Airlines • Midwest • American • Delta • United Jet Blue Global carriers Differentiation

46. TheRule of Three: Naturally occurring competitive forces will create a consistent structure in many mature markets. Three major players often compete by offering a wide range of related products and services and serve most major market segments. The Rule of Three

47. Functional strategies are at the business-unit level. Operating strategies are at the product level. IV. Marketing Strategy Decisions • A Marketing • Strategy Addresses: • Selection of a • target market. • Development of a • marketing mix.

48. Business & Product Marketing Strategies Decision Area Business Marketing Strategy Product Marketing Strategy Target market Segmented or mass approach Specific definition of target market Product Number of different products Specific features of each product Price General competitive price level Specific price Distribution General distribution policy Specific distributions Marketing General emphasis on marketing Specific marketing communications communications tools communications program Product + Price + Promotion + Place 4P’s= Exhibit 3-11, p.63

49. Alternative Views of Strategy Sustainable Competitive Advantage The implicit Strategy Model of the Past Decade • One ideal competitive position in the industry • Benchmarking of all activities and achieving best practice • Aggressive outsourcing and partnering to gain efficiencies • Advantages rest on a few success factors, critical resources, core competencies • Flexibility and rapid responses to all competitive and market changes • Unique competitive position for the company • Activities tailored to strategy • Clear trade-offs and choices vis-à-vis competitors • Competitive advantage arises from fit across activities • Sustainability comes from the activity system, not the parts • Operational effectiveness a given

50. Entry Strategy: The approach used to market products in an international market. The Basic Options: Exporting Joint Ventures Direct Investment International Marketing Strategies • International Strategic Orientation: • Selection of a (international) strategic orientation.