Bronis Verhage
ISBN: 9789001818661
http://www.marketingfundamentals.noordhoff.nl
© 2016 Noordhoff Uitgevers bv
GLOSSARY
Chapter 2 Strategy Development and Marketing Planning
Strategy The courses of action through which – in what markets and with what
resources – a company intends to realize its marketing goals (such as an increased
market share) in the next 2 to 5 years.
Scenario Description of a likely outcome of possible developments at some point in
the future in light of the company’s current decisions.
Tactic A company’s actions to implement the broader strategy and meet its shortterm objectives (one year or less).
Product-market combination One of the units in which the organization is split up for
implementing its strategic decisions to focus – with specific products – on groups of
prospects with particular needs.
Strategic business unit A self-contained business or part of a diversified company
(such as a subsidiary, product line or brand) with its own management, set of
competitors and a distinct strategy (SBU).
Strategic profile Snapshot of a company’s ‘big-picture’ strategy – including its target
markets and products – outlined at the highest organizational level.
Strategic planning Development of a long-term plan to effectively use the company’s
resources – within the constraints of its mission and business definition – in order to
maintain a strategic fit between its objectives and the market opportunities.
Business definition Answer to the question, ‘What business are we in?’, based on
(Abell’s) three dimensions: the customers (target markets), their needs (desired
benefits) and technologies used to satisfy the needs..
Business scope Part of the business definition, describing the extent of the firm’s
current activities.
Abell model Analytical tool to help define a company’s business, based on customer
segments, customer functions (benefits sought) and technologies.
Product-market-technology combination A business unit’s strategic choice of
products marketed, customers served and technologies utilized to satisfy market needs
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Bronis Verhage
http://www.marketingfundamentals.noordhoff.nl
ISBN: 9789001818661
© 2016 Noordhoff Uitgevers bv
Mission statement Formal description of a company’s mission to direct its growth,
usually listing its products or services, target markets, core competencies and the
technologies it should master.
Core competencies The company’s strengths and well-performed activities that its
customers appreciate and competitors would find hard to duplicate.
Image Someone’s perception of a product, brand or an organization, which – from a
marketing perspective – should overrule the reality of the situation.
Environmental factors External, non-controllable forces and developments that may
affect a firm’s market position and marketing strategy.
Strengths A company’s capabilities that may help it realize its objectives.
Weaknesses Internal constraints that could obstruct a firm’s ability to reach its goals.
Opportunities External events or trends that a company could possibly exploit to its
advantage.
Threats Trends or forces in the environment that may – unless the firm effectively
reacts to them – negatively affect its revenues and profits.
SWOT analysis An analysis – as the groundwork of strategic planning – that identifies
a company’s strengths, weaknesses, opportunities, and threats in order to assess the
implications (situation analysis).
Confrontation matrix Based on the SWOT analysis, this tool combines a company’s
internal strengths and weaknesses with external opportunities and threats in order to
identify possible strategies.
Brand equity Strategic and financial value of a brand to a company based on positive
customer attitudes about the brand.
Objective The results the organization wants to achieve; in order to motivate and
provide guidelines to managers, objectives should be specific, measurable, attainable,
realistic and time-bound.
Hierarchy of objectives Ranking of goals in order of importance, reflecting the
company’s priorities.
Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e
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Bronis Verhage
http://www.marketingfundamentals.noordhoff.nl
ISBN: 9789001818661
© 2016 Noordhoff Uitgevers bv
Portfolio analysis Evaluation and comparison of an organization’s SBU’s, used to
allocate corporate resources and guide strategic planning.
Economies of scale Cost savings as a result of producing or selling a larger number of
units.
Experience curve Decrease in variable costs per unit – based on the learning effect –
as the company gains experience in producing and selling the product (learning curve).
Cash flow Movement of cash into and out of a company, based on receipts and
disbursements.
Market share The percentage of the total market or of total industry sales of a
product held by a company.
BCG portfolio analysis Developed by the Boston Consulting Group, it offers a bird’s
eye view by placing the company’s SBU’s (question marks, stars, cash cows and dogs) in
a four-cell ‘market share / market growth matrix’.
Star SBU with a large market share in a high-growth market; it has a modest cash flow
since most of its profits are spent on marketing to protect its market share and finance
further growth.
Cash cow SBU with a high market share in a market growing less than ten percent per
year; its surplus cash flow is used to finance the growth of other SBUs with higher
growth potential.
Question mark SBU with a low market share in a fast-growing market. Because of its
negative cash flow, marketers must decide whether to invest in this SBU in order to
increase its market share (Problem child).
Dog SBU with a low market share and a modest cash flow in a saturated, low-growth
market. A firm may maintain dogs as long as they are profitable..
Investment strategy Strategy to increase or maintain a business unit’s market share
or to create a more balanced portfolio. Four options are to build, hold, harvest, or
divest.
Build strategy Aggressive growth strategy to increase an SBU’s market share by
turning a question mark into a star.
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Bronis Verhage
http://www.marketingfundamentals.noordhoff.nl
ISBN: 9789001818661
© 2016 Noordhoff Uitgevers bv
Hold strategy Investment strategy to maintain an SBU’s market share, for example
when defending a cash cow’s current market position.
Harvest strategy Strategy to maximize short-term cash flow – at the expense of
market share – by minimizing marketing investments for a dog or question mark
(milking).
Divest strategy Strategy to withdraw from the market by selling off business units
classified as dogs or question marks.
General Electric portfolio analysis Multi-factor portfolio model in which business
units are classified in a nine-block matrix based on their market attractiveness
(including market growth, competition, profit margin) and competitive position
(market share, brand image, customer loyalty, etc.)(market attractiveness-competitive
position matrix).
Generic strategy Marketing approach to gain a competitive advantage in an industry
through a cost leadership, a differentiation or a focus strategy.
Cost leadership strategy Generic strategy that involves cutting expenses and reducing
prices of standardized products in order to gain market share by appealing to pricesensitive customers.
Differentiation strategy Charging premium prices for high quality products or unique
services that customers perceive as superior to other brands.
Cost focus strategy Niche strategy in which a company (such as Ryanair) charges low
prices, made possible by a cost advantage in a narrow target market through reduced
expenses.
Differentiation focus strategy Offering services or products (e.g. Aston Martin) to a
limited target market that are significantly different from those of competitors (niche
strategy).
Growth strategy Strategy that aims to expand a firm’s market share – even at the
expense of short-term profits – through increased sales to current users or by targeting
new users.
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Bronis Verhage
http://www.marketingfundamentals.noordhoff.nl
ISBN: 9789001818661
© 2016 Noordhoff Uitgevers bv
Penetration strategy Boosting market share by selling more of the firm’s existing
products to current customers (e.g. through promoting new uses) or by attracting new
customers within the current target market (market penetration strategy)
Market development strategy Identifying new (e.g. demographic or export) markets,
or new uses for current products (as in yogurt garlic sauce).
Product development strategy Growth strategy (in the product-market expansion
matrix) in which the firm introduces a new – or substantially modified – product to
reach new buyers in the currently serviced market.
Diversification strategy Increasing sales volume by introducing new products to
attract customers in new markets or by acquiring a company not related to the firm’s
current business.
Organization Framework through which employees are assigned to certain jobs and
their activities coordinated in order to execute plans and realize the objectives.
Marketing organization Structure for making and implementing decisions about the
marketing mix, for example through a product management system.
Centralized organization Organization in which most decisions are made by top-level
managers who delegate little decision-making authority down the chain of command.
Decentralized organization Organization in which top management delegates much
of the decision-making authority to lower levels in the hierarchy.
Product manager Marketer who develops and implements the strategic and annual
plans for a particular product or product line.
Marketing plan Managerial document that analyzes the marketing situation –
including opportunities and threats – and specifies how the organization intends to use
its resources and marketing tools to implement the marketing strategy and achieve its
formulated objectives for a product line, brand, or the entire business.
Business strategy How an organization – in light of its mission, core competencies and
current environment – intends to achieve its long-term objectives
Marketing strategy Part of the business strategy that describes how the company –
within its business definition – intends to achieve its long-term marketing objectives,
Ma rk eti n g Fu n da m e n tal s, An In t e rn ati o n al P e r sp e ctiv e
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Bronis Verhage
http://www.marketingfundamentals.noordhoff.nl
ISBN: 9789001818661
© 2016 Noordhoff Uitgevers bv
including implications for deciding on target markets, marketing mix variables and
positioning.
Marketing tactics Blueprint for action – based on the marketing mix – detailing which
measures must be taken when, to meet the short-term objectives.
Marketing control A four step process of 1) setting specific marketing goals, 2)
measuring progress toward realizing these goals, 3) comparing the actual results with
the goals, and 4) taking corrective action, when necessary.
Contingency plan Course of action to be followed – as an alternative to the primary
marketing plan – in the event of major changes in an existing situation, such as an
unanticipated threat or opportunity.
Implementation The process of converting a plan into action through executing
detailed marketing action plans.
Evaluation Assessing the extent to which the marketing objectives are being
accomplished.
Control System for evaluating business or marketing results and, if needed, taking
corrective action to ensure that the objectives are efficiently realized.
Effectiveness The extent to one succeeds in meeting the stated targets.
Efficiency The cost of the resources used, relative to the results.
Marketing audit A systematic, critical, and impartial review and appraisal of the total
marketing operation.
Sub-optimization Lack of cooperation between departments, resulting in less than the
best possible outcome.
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